EPB Research: My Final Thoughts on the Coming Recession
Economies go through boom-and-bust cycles. The boom cycle looks more obvious in hindsight. The massive rally in real estate, stocks, cryptocurrencies, and other assets in 2020 and 2021 were signs of a boom.
The pullback since then is the sign of a bust. While that bust has so far been confined to asset prices, the real economy is starting to show signs of stress. One area that portends pain ahead is in the job market.
So far, most job losses have occurred at big tech companies. These firms may have over hired during the last boom. But the construction sector is a different story. That sector is much more cyclical.
For now, those losses have been minimal. However, this space also didn’t see an explosion of new job creation over the past few years akin to the hiring in big tech.
It’s likely that we’ll see more job losses ahead. While the headline job losses won’t be huge, a rising number of companies laying off workers may tip the economy into a recession.
Construction jobs will likely decline this year. That will follow the data we’ve already seen on slowing construction permits, and units under construction. Overall construction data shows a 20-30 percent decrease from the prior peak. Investors and traders alike may need to prepare for higher unemployment, including the potential loss of their own job.