Is anybody having serious doubts about all of this "recession is imminent" talk? Despite the interest rate hikes, the economy still seems to be doing well ATM.
As the old saying goes "Economists have accurately predicted 11 of the last 8 recessions".
Yeah, that's one unfortunate aspect of recession talk. It can become a self-fulfilling prophecy.
That's not to say that there aren't issues: inflation being the obvious thing, and the corresponding interest rate hikes and the end of "cheap money" being another.
There is a housing crisis on hand, people are struggling to afford food due to inflation, and hundreds of thousands have lost their jobs. The "normal" person who isn't a SV millionaire has been gouged on every angle since covid started with little to no protection from captured regulators. Oh, and we're in a proxy war with Russia.
If you base your whole argument for recession off of Axios' year of year gdp change percentage you are hyperfixating a complex economic outlook and dumbing it down into a cherry picked metric that is showing up for any number of correlations such as return to work post lock downs.
I would say that “normal” people are doing very well compared to last year as labor demand and wage rises at the low end are high, energy prices and food prices have come down, and housing is crashing in many areas.
The upper middle class (i.e most software professionals on this site) and tech billionaires are having a shit year as tech stocks crash and weigh on the market. Don’t discount that you’re in an info bubble. The worst info bubbles are ones that affect the journalism industry and extremely online communities like the ones frequented by software engineers.
I think you had a little projection there calling me in a bubble. Why don't we focus on what is actually happening instead discrediting who I am with assumptions.
False, and before you blame the egg crisis on the reported avian flu, milk and bread demonstrate the same rise. Pick a product, it's gone up, PPI for all commodities shot up indicating macro changes to the economy (in this case reactions to inflation where producers raise rates) https://fred.stlouisfed.org/graph/?g=Ze8G
True, but not in ways that helps consumers. Landlords are doubling down and renting. Properties are sitting on market far longer than normal. Median sales price will decrease with interest rate changes, but with the root cause issue unresolved of lack of construction (supply), very large demand as the new generations age, and flippers and renter barons unchecked.. The housing market is not going to be affordable for low, middle, or even upper middle class citizens. I also think this kind of talk completely belittles how massive of a change occurred to housing prices in the last 5 years. Compare that to wage increases and viola, your normal every day person is in bad shape.
Do you want anecdote? People aren't doing well. Go talk to your neighbors. A single corrective change percent movement from GDP reported by Axios is manipulative and a narrative article in my opinion.
That’s a fair assessment. Wages have not adjusted uniformly, while inflation tends to hit people fairly equally, so some have benefited significantly more than others, while other have suffered significantly more than the rest.
The quarter over quarter change shows strong and consistent growth since the brief COVID recession, so how exactly do you think that counters the YOY narrative?
Additionally, unemployment, which almost invariably rises starting before a recession is low and flat.
Real (inflation-adjusted) wages have risen the last two quarters, after falling due to inflation. [0]
Fair points. My opinion is best oversimplified would be due to our return to 2019 levels on wages with pricing on maslow items having skyrocketed. Rate changes and housing data keeps me uncomfortable.
Otoh unemployment could be artificially low right now due to covid. You had a period of job loss and high unemployment, but along side that you had a period of lower than normal immigration. Meaning the total workers employed today, and in some hypothetical scenario where covid didnt happen and immigration kept pace, could very well be the same. Just with the former unemployment would be low and unemployment would be higher, but the same “pre recession jobs contraction” could be happening.
All current economic indicators have been quite strong... employment, GDP, retail sales, wage growth. Nominal GDP is running close to 10%, which is massive relative to recent history.
There has been a pervasive media narrative that recession is imminent though. Many leading indicators are looking poor... survey metrics, shipping costs, growth rates have slowed (while still being strong). I consider these more "soft" datapoints though. A lot is a normalization of covid era excesses.
It's pretty clear from history that Fed tightening cycles end in recession the vast majority of times, but my bet is that long end rates (10y) will have to spike again to at or above 4% before we trigger an actual recession. The market has frontrun it far too early which became self-defeating
Yeah, everything that went on during the "peak COVID era" has definitely flipped a lot of things around, and confused the issue in many areas. I expect that's one reason it's so hard right now to be sure what's really happening.
The other thing that strikes me about this is that the fed has been looking for a good chance to start raising rates for a LONG time now. Interest rates have been running really low by historical standards for a long time IIRC, to the point that there was talk about the possibility of negative interest rates possibly being needed in response to some future economic downturn. They wanted rates up a bit to have "dry powder" to expend in response to the next (actual) recession. The risk, obviously, is the possibility of triggering a recession through that very act of trying to get rates back up to a "normal" level.
All the indicators except the mortgage to income ratio that has grown seemingly exponentially the last few months. A housing bubble alone is capable of setting off a recession certainly, and we are in a huge one.
And it will eventually. But that's far down the line... prices are still well above the covid era bubble run.
And the easing of financial conditions over the past few months has buoyed the previously declining housing metrics. Markets front ran the recession far too early, which led to the recession not happening. Now Fed likely has to hike even more than they would have otherwise
I do imagine we underestimate the boomers here, the amount of wealth they sit on and the completely inelastic consumer spending they represent along with giving them an 8.7% raise in 2023. The people I know that get social security already have more money than they can ever spend in investments alone. They don't even spend their pensions let alone touch the SS check.
This forum is really strongly plugged in to the VC ecosystem (surprise) and that seems to dominate the narrative here. High interest rates are crushing the VC machine, but that’s an almost insignificant part of the overall economy.
I don’t think there is much of any evidence that the broader labor market is going to ease anytime soon. Particularly given the fact that boomers are at the height of retirements.
Very few of us economists will actually say “yes an impression is going to happen next year.” Nearly always we say things like: “we believe there is an elevated probability of a recession over X period.”
This isn’t to weasel out of taking responsibility. This is an extremely hard problem. (How many recessions have there been for which we have good data? Probably fewer than 20.)
Some months ago a lot people on this site claimed Biden was full of it when he said we aren’t in a recession. I wonder how many will admit to being wrong on this.
There goes my hope of buying a home. I was really hoping for a recession and housing market downturn. Stuff is still very expensive at the grocery store. I guess I still have my job despite layoffs, so I'll thank biden for that.
Not sure how its a different issue. Wouldn't a recession have made the home prices affordable.
Your point is what? Biden somehow predicted the future and claimed we are not in recession. Criticism was valid when he made that statement. Not sure why current news will make his previous statement right.
No, that's never guaranteed. Housing is a speculative asset with consistent demand from both investors and residents. A recession may slow the growth of prices, but there's no guarantee they would drop.
The issue at hand (that I originally brought up) is that a lot of people claimed Biden was wrong to say we are not in a recession. Those people are wrong. I said as much in my original post.
Not sure i understand your logic. How can you take something from today and go back and apply to something that was said months ago. Those ppl were not wrong when the statement was made.
We weren’t in a recession then and aren’t in one now. At any rate, your responses were a sidestepping of the issue I brought up and when pointed out to you your response wasn’t to acknowledge this.
> Not sure how its a different issue. Wouldn't a recession have made the home prices affordable
Hypothetically, once people are absolutely forced to sell or are foreclosed on.
Any current slow or drop in home prices has mostly been because interest rates have driven monthly mortgage payments too high and reduced the pool of buyers. Otherwise inflation would be driving home prices up too.
You are trying to time the market. Don't do that. When you are financially capable of buying a house, do it. Don't get take a variable rate mortgage. If you are stable on a 5 year fixed rate, the rest doesn't matter. Up, down, sideways, whatever.
If you time the stock market wrong without leverage, worst case you lose all your money.
Time the housing market wrong and you could rapidly have sizeable negative wealth. Toss in a forced sale in a divorce or something and you've lost both all the money you ever had but also the money you ever will up until bankruptcy filing after which no one but absolute sharks will rent you a place either. At that point MonkeyMalarkey will not be around to point you to the best dumpster to sleep behind...
In the first para, you are optimizing for expected value by not timing the market. In the second para you should not be optimizing for expected value but rather assurity you don't end up sleeping behind the dumpster, so the advice may not be transferrable.
A recession is defined as whatever NBER says it is.
2 quarters is a useful shorthand that frequently is wrong. The 2020 recession lasted all of three months; not anywhere near two quarters. The 2001 recession did not have two consecutive quarters of GDP decline.
50 comments
[ 0.14 ms ] story [ 104 ms ] threadAs the old saying goes "Economists have accurately predicted 11 of the last 8 recessions".
That's not to say that there aren't issues: inflation being the obvious thing, and the corresponding interest rate hikes and the end of "cheap money" being another.
If you base your whole argument for recession off of Axios' year of year gdp change percentage you are hyperfixating a complex economic outlook and dumbing it down into a cherry picked metric that is showing up for any number of correlations such as return to work post lock downs.
You can take a look at the quarter of quarter change https://fred.stlouisfed.org/series/GDP#0
In my opinion it doesn't align with axios' narrative.
The upper middle class (i.e most software professionals on this site) and tech billionaires are having a shit year as tech stocks crash and weigh on the market. Don’t discount that you’re in an info bubble. The worst info bubbles are ones that affect the journalism industry and extremely online communities like the ones frequented by software engineers.
Wages are stagnant, energy costs are going up.
Hourly Wages change yoy https://fred.stlouisfed.org/graph/?g=Zeb7
Energy Price Index https://fred.stlouisfed.org/graph/?g=Zebr
>food prices have come down
False, and before you blame the egg crisis on the reported avian flu, milk and bread demonstrate the same rise. Pick a product, it's gone up, PPI for all commodities shot up indicating macro changes to the economy (in this case reactions to inflation where producers raise rates) https://fred.stlouisfed.org/graph/?g=Ze8G
eggs https://fred.stlouisfed.org/graph/?g=Ze80 milk https://fred.stlouisfed.org/graph/?g=Ze8b bread https://fred.stlouisfed.org/graph/?g=Ze8h
>housing is crashing
True, but not in ways that helps consumers. Landlords are doubling down and renting. Properties are sitting on market far longer than normal. Median sales price will decrease with interest rate changes, but with the root cause issue unresolved of lack of construction (supply), very large demand as the new generations age, and flippers and renter barons unchecked.. The housing market is not going to be affordable for low, middle, or even upper middle class citizens. I also think this kind of talk completely belittles how massive of a change occurred to housing prices in the last 5 years. Compare that to wage increases and viola, your normal every day person is in bad shape.
median sales price https://fred.stlouisfed.org/graph/?g=Ze67
Do you want anecdote? People aren't doing well. Go talk to your neighbors. A single corrective change percent movement from GDP reported by Axios is manipulative and a narrative article in my opinion.
The graph you linked shows wages increasing every month, consistently, over the last two years.
It is also not measuring YoY, it’s MoM.
If energy includes gasoline well that is going back up to almost triple the price from 2-3 years ago in my area.
Sure wages may have gone up some (mine did) but I can barely afford this economy now where before I was doing alright.
Additionally, unemployment, which almost invariably rises starting before a recession is low and flat.
Real (inflation-adjusted) wages have risen the last two quarters, after falling due to inflation. [0]
[0] https://fred.stlouisfed.org/series/LES1252881600Q
All current economic indicators have been quite strong... employment, GDP, retail sales, wage growth. Nominal GDP is running close to 10%, which is massive relative to recent history.
There has been a pervasive media narrative that recession is imminent though. Many leading indicators are looking poor... survey metrics, shipping costs, growth rates have slowed (while still being strong). I consider these more "soft" datapoints though. A lot is a normalization of covid era excesses.
It's pretty clear from history that Fed tightening cycles end in recession the vast majority of times, but my bet is that long end rates (10y) will have to spike again to at or above 4% before we trigger an actual recession. The market has frontrun it far too early which became self-defeating
Yeah, everything that went on during the "peak COVID era" has definitely flipped a lot of things around, and confused the issue in many areas. I expect that's one reason it's so hard right now to be sure what's really happening.
The other thing that strikes me about this is that the fed has been looking for a good chance to start raising rates for a LONG time now. Interest rates have been running really low by historical standards for a long time IIRC, to the point that there was talk about the possibility of negative interest rates possibly being needed in response to some future economic downturn. They wanted rates up a bit to have "dry powder" to expend in response to the next (actual) recession. The risk, obviously, is the possibility of triggering a recession through that very act of trying to get rates back up to a "normal" level.
And the easing of financial conditions over the past few months has buoyed the previously declining housing metrics. Markets front ran the recession far too early, which led to the recession not happening. Now Fed likely has to hike even more than they would have otherwise
I do imagine we underestimate the boomers here, the amount of wealth they sit on and the completely inelastic consumer spending they represent along with giving them an 8.7% raise in 2023. The people I know that get social security already have more money than they can ever spend in investments alone. They don't even spend their pensions let alone touch the SS check.
I don’t think there is much of any evidence that the broader labor market is going to ease anytime soon. Particularly given the fact that boomers are at the height of retirements.
This isn’t to weasel out of taking responsibility. This is an extremely hard problem. (How many recessions have there been for which we have good data? Probably fewer than 20.)
Not where I live. I see markdowns of 10k on a 600k homes. Nothing really changed.
Taking a look at the home value history for each...
Random home in Southern CA: https://www.zillow.com/homedetails/1414-N-Center-St-Orange-C...
Random home in Boulder CO: https://www.zillow.com/homedetails/175-Gold-Run-Rd-Boulder-C...
Random home in Edmond OK: https://www.zillow.com/homedetails/7105-Robey-Dr-Edmond-OK-7...
Random home in Jacksonville FL: https://www.zillow.com/homedetails/7226-Nottinghamshire-Dr-J...
I could go on, but I think the trend mentioned (~10% drop) is consistent across the US.
Not a lot; median sale price nationally dropped $300 from $468k to $467,700 from Q3 2022 to Q4 2022.
YoY is an increase of $44,100 from Q4 2021, and Q3 2022 was the peak, so $300 is both the quarterly and from-peak drop.
Your point is what? Biden somehow predicted the future and claimed we are not in recession. Criticism was valid when he made that statement. Not sure why current news will make his previous statement right.
Hypothetically, once people are absolutely forced to sell or are foreclosed on.
Any current slow or drop in home prices has mostly been because interest rates have driven monthly mortgage payments too high and reduced the pool of buyers. Otherwise inflation would be driving home prices up too.
Time the housing market wrong and you could rapidly have sizeable negative wealth. Toss in a forced sale in a divorce or something and you've lost both all the money you ever had but also the money you ever will up until bankruptcy filing after which no one but absolute sharks will rent you a place either. At that point MonkeyMalarkey will not be around to point you to the best dumpster to sleep behind...
In the first para, you are optimizing for expected value by not timing the market. In the second para you should not be optimizing for expected value but rather assurity you don't end up sleeping behind the dumpster, so the advice may not be transferrable.
Or just buy it outright, with that kind of leverage.
Biden was criticized for trying to spin off the accepted definition for political gains.
2 quarters is a useful shorthand that frequently is wrong. The 2020 recession lasted all of three months; not anywhere near two quarters. The 2001 recession did not have two consecutive quarters of GDP decline.
They explain why they do not use the two quarter method here: https://www.nber.org/research/business-cycle-dating/business...