SocGen Analyst: A US recession may have already begun

• Investors hope for a “soft landing”
• SocGen analyst points to two recession indicators
• US labor market falls short of expectations in October

More and more investors are hoping that with the Fed’s supposedly reached interest rate peak, a “soft landing” could be achieved with regard to the development of the US economy. In this context, we speak of a soft landing when the monetary authorities cause the economy to cool down in order to limit rising inflation without the economy slipping into recession. Although there are several ways to define a recession, it usually refers to a decline in the economy in two consecutive quarters.

US GDP strong in third quarter

As the economic data from the Federal Statistical Office for the third quarter of 2023 show, the USA’s gross domestic product increased by 1.2 percent in the third quarter compared to the previous quarter. Compared to the same quarter last year, an increase of 2.9 percent was achieved. In the euro area, economic output fell by 0.1 percent in the third quarter compared to the second quarter of 2023. The US economy is therefore doing much better than its European counterpart.

Nevertheless, investors should not think they are safe too early, warns Société Générale analyst Albert Edwards in a report to clients that is available to MarketWatch. The strategist is already known for his bearish stock market assessments and lived up to this reputation in his most recent comments.

SocGen analyst sees recession indicators

The SocGen expert points to two indicators that have heralded an economic downturn in the past. On the one hand, Edwards noticed the subcategory of logistics jobs when looking at the US unemployment figures. Employment here has already fallen significantly this year, which is probably due to the excess demand from the Corona period: “The logistics industry is one of the best cyclical whistleblowers you could wish for. We have already shown in the past that “A decline in trucking jobs typically precedes recessions,” MarketWatch quoted Edwards as saying.

In addition, another subcategory of the US unemployment statistics alarms stock market experts. The number of temporary workers in the service sector also fell noticeably this year. This also happened in the run-up to the recessions in 2001 and 2007, which is why Edwards’ alarm bells are ringing: “Before the 2001 and 2007 recessions, the supply of temporary workers collapsed approximately 12 months before the recession. For this reason, supporters of the soft landing should be concerned “That this has been declining steadily since October 2022. If we add about twelve months, we end up with…um…today,” said the expert, according to the news portal.

US labor market data for October below expectations

Labor market data for October was released in early November. Job growth here was lower than economists had previously expected. 150,000 new jobs were created in the private sector and the state. Preliminary estimates from Dow Jones Newswires had predicted an increase of 170,000 jobs here. On the other hand, business activity in the US services industry was somewhat more lively in October than in the previous month. However, it was lower than previously expected.

However, the labor market data caused joy on the stock market, as investors hoped that a weaker job market would make it more likely that the US Federal Reserve will not raise interest rates further. However, the monetary authorities themselves still reserve this option. So only time will tell whether there will actually be a soft landing or whether the first signs of a recession have already occurred.

Editorial team finanzen.net

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