Interview, Podcast
Why US recession fears are likely overblown
- The economy is projected to create approximately 150,000 jobs monthly in 2024, a rate aligning with labor supply trends as immigration slows after peaking in 2023, contrasting with unsustainably high 2023 figures of 250,000 monthly job growth and 3% GDP growth that were supported by the prior immigration boom.
- GDP growth is tracked at roughly 2.5% for both Q2 and Q3, with manufacturing data considered misleadingly weak due to survey bias while underlying hard data indicates a continued good pace, and a sectoral shift observed where goods sector weakness is offset by services sector strength.
- Unemployment is noted to have risen by six-tenths over three months, with 30% of the increase from cycle lows attributed to temporary frictions involving recent immigrants, though the speaker views current trends as a deceleration rather than an imminent recession dip.
- Recession probability for the next 12 months is estimated to be well below consensus and investor averages, significantly lower than Goldman Sachs' recent adjustment of odds to 25%, despite acknowledging that persistent unemployment rises or spiraling permanent layoffs could deteriorate quickly.
- Federal Reserve interest rate policy is expected to feature consecutive cuts in September, November, and December, with a baseline expectation of a 25 basis point reduction in September and a non-negligible possibility of a 50 basis point cut if incoming data warrants it, while emergency pre-September cuts are not anticipated absent an immediate crisis.
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