“the u.s. economy is not just facing a recession”
2024-09-08
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the august non-farm employment report released by the u.s. department of labor on the 6th local time showed that although the u.s. unemployment rate that month dropped slightly from 4.3% in the previous month to 4.2%, the number of new non-farm jobs was only 142,000, significantly lower than expected, and the previous value was also significantly revised downward.
screenshot of reuters report
after the release of the above report, the market's expected probability of the federal reserve cutting interest rates by 50 basis points this month increased from 50% to 55%.
screenshot of a report from the us market watch website
as expectations of interest rate cuts increase, concerns about a us economic recession have once again intensified.
a large number of analyses believe that due to factors such as a weak job market and increased household debt, a further slowdown in us economic growth has become a high probability event.
“it’s becoming increasingly unlikely that we’ll have a soft landing”
the unemployment rate is a relatively intuitive indicator of economic recession. when the unemployment rate continues to rise for a certain period of time and exceeds a certain limit, it can be determined that the economy has entered a recession.
since the beginning of this year, the u.s. unemployment rate has risen for several consecutive months, and the number of new non-farm jobs has been significantly revised down several times, causing the market to deeply doubt whether the u.s. economy can achieve a soft landing.
diane swank, chief economist of kpmg's u.s. branch, believes that the current weakness in the u.s. labor market is getting closer and closer to the performance during the recession.
swank:"august job growth was driven by hiring in the health care and social assistance sectors, with government employment and leisure and hospitality employment also rising. but that's the problem. as of the end of july, the number of job openings in these three industries had fallen sharply, and they are interest rate-insensitive industries, so it's clear what their future employment momentum will be. this also means that the possibility of a soft landing for the us economy is getting smaller and smaller."
data map: diane swank
kevin mahan, chief investment officer of hennion & walsh asset management in the united states, specifically mentioned that the rising u.s. household debt amid a weak job market will have a lasting negative impact on personal consumption, thereby dragging down economic growth.
mahan“given that personal consumption expenditures account for about 70% of the u.s. economy, the economy will only slow further if consumers start to rein in spending as they lose jobs and use their income to pay down personal debt,” he said.
data map: kevin mahan
in addition to the lower-than-expected number of new non-farm jobs, the us manufacturing purchasing managers' index has fallen below the "boom-bust line" for five consecutive months.
in addition, according to the federal reserve's national economic situation survey report released recently, economic activity in only three of the 12 regions increased slightly, while the number of regions where economic activity remained flat or declined increased from five in the last report to nine.
these data confirm the possibility that us economic growth will slow down further or even enter a recession.
screenshot of the report from türkiye's anadolu agency
david rosenberg, an economist at rosenberg research, listed 20 indicators of a u.s. recession in a report at the end of last month. according to his analysis, nine of them have been triggered, which means that "the possibility of the u.s. economy falling into recession is rising."
in fact, the number of recession signals for the u.s. economy has been increasing over the past two years, with only 10% being triggered in 2022, and rising to around 25% in 2023 and the first half of this year. since then, the rate of increase has accelerated, reaching 45% now.
screenshot of the report from the us "business insider" website
“the u.s. economic development model is undergoing a qualitative change”
typically, the fed’s monetary policy objectives can be simplified as a “dual mandate,” namely, “maintaining price stability” and “achieving full employment” to avoid a recession in the u.s. economy.
jpmorgan chase ceo jamie dimon has been warning of the risk of a recession in the u.s. economy since 2022.
in an interview with us media last month, he said his views on the possibility of a recession were "the same as before."
dimon:“there are many uncertainties in the u.s. economy right now. factors such as geopolitics, housing costs, government deficits, and presidential elections can all cause market panic. based on the u.s. government’s future large-scale spending on green economy and military expansion, i am a little skeptical about whether the fed can reduce inflation to its annual target of 2%.”
data map: jamie dimon
analysts generally believe that the current us economy faces three problems that need to be solved: first, some people are spending more than they earn; second, the ratio of housing prices to income is too high, and transaction volume has dropped sharply; third, the stock market is overvalued. in addition, the united states also has a serious debt problem, and the debt level is unsustainable.
some experts also pointed out that the current signs of weakness in the us economy are very similar to those before the recession in 2007, including a large number of indicators showing that the economy is facing the risk of decline: falling housing sales, pressure on household budgets, and a large amount of hot money flowing in the market...
the latest financial stability report released by the federal reserve shows that 72% of respondents believe that the united states is currently facing risks in its response to inflation and adjustments to monetary tightening policies; 56% of respondents believe that u.s. commercial and residential real estate are facing risks; 44% of respondents believe that the u.s. banking industry is facing risks; and 40% of respondents believe that the united states continues to be under pressure and faces huge risks in terms of fiscal and debt sustainability.
screenshot of the federal reserve report
mohamed el-erian, president of queens college, university of cambridge, chief economic adviser to allianz group, and renowned american economist, believes that the u.s. economy is facing more than just a recession.
he has repeatedly warned that the fed will not be able to reduce the us inflation rate to the target of 2% without hitting the economy. the underlying reason why the us economy cannot escape the risk of recession is that the current us economic development model faces fundamental risks and challenges.
el-elian:“the current economic development model in the united states is undergoing a qualitative change. we are no longer pursuing the previous benign economic policies characterized by deregulation and fiscal prudence, but have become a government that arbitrarily intervenes in industrial policies and implements irresponsible fiscal policies. at the same time, at the international level, we no longer talk about globalization, but choose division and decoupling.”
file photo: mohamed el-erian
source: global information radio "global in-depth observation"
reporter: shan shan
edited by lin wei
review by wang jian
producer: guan juanjuan
