Lloyd Linn
As Business Insider writes in its article dated May 6 of this year, judging by the negative changes in the labor market and the increase in job losses, the US economy has most likely already been in recession. This assumption was made by the QI Research CEO Danielle DiMartino Booth. One of his main arguments is the continuing deterioration of conditions in the labor market.
Seasonal recession and increased layoffs
According to the QI Research CEO, at least one indicator of unemployment in October 2023 could indicate the onset of a recession. The US is already mired in a recession and mounting job losses prove it. “Oh, my goodness, there’ve already been 22,000 job loss announcements in the month of May and it’s still a fairly young month. So on a seasonal level, we’re seeing a major pickup,” Danielle DiMartino Booth said.
It is the decline in employment rates that is preventing talk of a so-called soft landing. Specifically, Goldman Sachs’ (NYSE:GS) Recession Indicator indicates that when the three-month average unemployment rate rises 0.3 percentage points above the 12-month low, it historically indicates a recession. This is what happened last October with the loss of 192 thousand jobs.
Job market is continuing to weaken
Legendary forecaster Gary Shilling spoke about this also; in his opinion, the US will see a recession by year-end that could spark a 30% drop in the stock market. He also argues that there was already a sign of recession in 2023, such as a weakening labor market. Therefore, the coming recession will trigger a “severe correction” in the US stock market. In any case, the forecaster reminds, investors should be prepared for a recession, which could lead to a sharp drop in the stock market.
In addition, another sign of an imminent market decline is a sharp increase in the number of risky and speculative assets such as stocks and cryptocurrencies. “You look at all the kind of speculation that we’ve had out there, it’s indicative of a lot of overconfidence, and that usually gets corrected and corrected violently,” Shilling said. The economy is already showing weakness as high interest rates take a toll, as does a weak labor market and a 2-year high unemployment rate.
