Stay-At-Home Macro: We Are Not in a Recession, Nor Is One Imminent

Talk of a recession has ramped up in recent weeks. The first quarter GDP data showing a drop of 1.3 percent took many by surprise. A second such quarterly decline in a row would meet the actual definition of a recession.

But we may not get there. That’s because the data shows that the labor market is strong. And if the labor market is in a strong, most other economic problems are solvable.

Meanwhile, 7 out of 10 surveyed expect that the job market will be the same or better in the next year. If the labor market remains strong, rather than show signs of increasing layoffs, then the chances of a recession are slim.

Consumer spending makes up about 70 percent of the US economy. Yet spending is up about 3 percent in the past year. Even after adjusted for today’s high inflation levels, it’s clear that consumers are holding up well.

When consumer spending falters, that’s when investors should be concerned about a recession. The stock market will also start to price in the drop in spending, long before a recession is noted and declared.

Looking at these big-picture pieces of data, it’s clear that investors are still worried about inflation. But the possibility of a recession, beyond one that marks a technical drop for two quarters in a row, looks slim right now.

To read the full blog and view the charts and data with it, click here.