US Already in “Soft” Business Recession

US Already in “Soft” Business Recession

US Already in “Soft” Business Recession


JPMorgan (NYSE:JPM) economists warn that the risk of a recession within the next 12 months hit a new high in light of May’s grim jobs report.

“Our preferred macroeconomic indicator of the probability that a recession begins within 12 months has moved up from 30% on 5 May to 34% last week to 36% today (Monday),” JPMorgan’s Jesse Edgerton wrote. “This marks the second consecutive week that the tracker has reached a new high for the expansion.”

JPMorgan’s proprietary model considers the levels of several economic indicators, including consumer sentiment, manufacturing sentiment, building permits, auto sales, and unemployment.

The warning comes after the Bureau of Labor Statistics said US companies added just 38,000 NFPss during the month. Economists were expecting 160,000.

The US unemployment rate fell to 4.7% in May from 5.0% in April because 458,000 workers dropping out of the labor force. The real unemployment number a about 20%.

JPMorgan notes that NFPs (nonfarm payrolls) is not a factor in the model, but the unemployment rate is.

Notably: a low unemployment rate can be considered an ominous sign.

“The unemployment rate enters the model in two ways,” Mr. Edgerton explained. “As a near-term indicator, we watch for increases in the unemployment rate that occur near the beginning of recessions. So this morning’s move down in the unemployment rate lowered the recession probability in our near-term model. But we also find the level of the unemployment rate to be one of the most useful indicators of medium-term recession risk. So the move down in unemployment raises the model’s view of the risk of economic overheating in the medium run and raises the ‘background risk’ of recession.”

If these trends continue US President Barack Hussein Obama will leave office with the lowest unemployment rate ever and the fewest Americans working ever, it occurs to me that was his intention to begin with. How American’s ever put their Hope in him is beyond my understanding.

There are other signs of illness that cannot be ignored and augur poorly for future growth. Business investment has been negative now for 6 months, business profits have fallen. And small business confidence measured by the NFIB is sagging at recession area lows,.

Hence, what we are seeing in here is a “soft” business recession.

Monday, the US major stock market indexes finished at: DJIA +113.27 at 17920.33, NAS Comp +26.20 at 4968.72, S&P 500 +10.28 at 2109.41

Volume: Trade was below av with about 857-M/shares were exchanged on the NYSE

  • Russell 2000 +3.7% YTD
  • S&P 500 +3.2% YTD
  • DJIA +2.8% YTD
  • NAS Comp-0.8% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.33) Bullish (0.33) Bullish (0.27) Bullish (0.38)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.20) Neutral (0.12) Neutral (0.19) Bullish (0.29)
HeffX-LTN Analysis QQQ: Overall Short Intermediate Long
Bullish (0.26) Bullish (0.33) Bullish (0.31) Neutral (0.14)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.39) Bearish (-0.48) Very Bearish (-0.53) Neutral (-0.17)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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