It’s hard to make a recession case for the US economy. Mostly because the US economy’s not in a recession.
That’s supposed to be funny, but dry humor invariably falls flat in an era where satire’s dead and irony’s everywhere and always lost on everyone.
Let me put it this way instead: The two-year search for a US recession’s going about like the US military’s hunt for Bush Jr.’s Iraqi weapons of mass destruction. There’s just “no there there,” so to speak.
“Unlike a year ago, when most had a high chance of recession as [their] base case, consensus views and market pricing are much more complacent these days,” JPMorgan’s Mislav Matejka wrote this week.
As the figure shows, the market-implied odds of a downturn (which in this case just means the risk asset-implied odds) have fallen away almost entirely amid nearly two-dozen new S&P records so far in 2024 and grinding spread compression in credit.
Bearish balderdash isn’t hard to come by despite a demonstrable lack of convincing evidence to support downside domestic macro narratives. There’s always some data point, somewhere that can be leveraged in the service of a bear case, and when you’re preaching to the choir, as bears typically are, the evidence doesn’t have to be convincing.
On Thursday, initial US jobless claims rose. All the way to 221,000. That’s low by historical standards, but counted as the highest in months in the current context. The print was well ahead of consensus, which expected 214,000.
Does that matter? In a word: No. In two: No, no. The series hasn’t been useful as a predictor of anything (other than perhaps resilient NFP headlines) in years. In a testament to that assertion, note that the initial claims headline was unchanged at 212,000 for three straight weeks last month. It’s almost a dormant series.
Thursday’s release showed continuing claims fell in the week to March 23. 1.791 million was a six-week low.
I suppose I’m compelled to mention (if for no other reason than I “failed” to mention it in my JOLTS coverage on Tuesday) that the layoffs and discharges series in the BLS’s monthly job openings report hit a one-year high in February.
As ever, context is important: The red dot in the figure above is 10% below the quarter-century average, and 7% below the ex-March/April 2020 average (to strip out the months associated with the original pandemic lockdowns).
For whatever it’s worth, the Challenger, Gray & Christmas update on Thursday showed US employers announced more than 90,300 job cuts in March, the most in 14 months. And yet, announced cuts for all of Q1, at 257,254, were down 5% versus Q1 of 2023.
“Layoffs certainly ticked up to round out the first quarter, though below last year’s levels,” Andy Challenger said Thursday. “Many companies appear to be reverting to a ‘do more with less’ approach.”
