- David Rosenberg says the economy is flashing warning signs that a recession is on the horizon.
- Top economists pointed to a weakening job market and a slowdown in manufacturing activity.
- He noted that some financial models are already warning of a hard landing.
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The United States may be “sleepwalking” into recession, with key sectors of the economy beginning to show signs of recession, according to top economist David Rosenberg.
The president of Rosenberg Research pointed to several warning signs that a slowdown is on the horizon. This is in contrast to the feeling of most investors on Wall Street, where optimistic sentiment is growing as data continues to show stable economic conditions.
“With calls about recession, people always ask when are we going to throw in the towel, but maybe it’s time for people to start asking when others are going to throw in the towel,” Rosenberg said. No,” Rosenberg said in the memo. week. “We are beginning to see a downward trend in the data stream that suggests an economic downturn may not be as far away as many believe.”
As an example, the job market has continued to weaken over the past year. The unemployment rate rose to 3.9% in April, nearing its highest level in two years. This means the job market is moving closer to triggering the SARM rule, which is triggered when the three-month moving average of the unemployment rate is 0.5% above a 12-month low, Rosenberg said. , said the economy is moving ever closer to triggering the “golden rule” of the coming recession.
Economic activity is also starting to slow down. GDP in the first quarter was lower than expected. Economic growth rate is 1.6%, This is significantly lower than the growth in the past two quarters.
Outsourcing of manufacturing activities April marked her 17th contraction in the past 18 months. Rosenberg said manufacturing has contracted only twice since 1997, and the economy never went into recession, a strong sign that the economy is weakening. It pointed out.
Popular recession models already suggest that a recession may be on the horizon. The 2-10 US Treasury yield curve, a notorious indicator of recession accuracy, is signaling the first recession since July 2022.
The full model, which estimates the probability of a recession over the next 12 months, shows that there is still a nearly 50% chance that the U.S. will enter a recession over the next 12 months.
“Don’t be complacent,” Rosenberg said. “The labor market is cracking, a slowdown in services activity is weighing on real-time growth, and forward-looking financial signals still suggest a slowdown is coming. “There is,” he said.
Mr. Rosenberg has been warning of a coming recession for months, and fears of a recession have grown as investors expect the Fed to keep long-term interest rates high. Rising interest rates risk tightening the economy too much and triggering a recession, the paper said, adding that markets are currently pricing in only one or two rate cuts by the end of the year. CME Fedwatch Tools.