In recent months, ominous signs have emerged, painting a bleak picture of the economy as it heads into what appears to be a looming recession. One striking concern is the prolonged dip in manufacturing new orders, which have lingered at recessionary levels for a troubling 14 consecutive months.
This pattern is reminiscent of the stagflationary era of the 1980s, during the double-dip recession. Adding to the anxiety is the steepening of US yields—a historical precursor to economic downturns. Job market indicators are equally disconcerting, with a nationwide surge in initial jobless claims. Notably, California has seen a staggering 14,000 claims spike, and these figures are real, not seasonally adjusted.
However, the gravity of the situation may be underestimated by a market that currently appears robust. Lagging job data and a drop in the percentage of companies with strong Altman Z-scores, measuring bankruptcy risk, are concerning signals. For the first time on record, less than 10% of companies exhibit strong financial health, while the percentage facing imminent bankruptcy has hit an all-time high.
The GDPNow model’s nowcast for Q4 2023 paints a somber picture, indicating a 1.2% growth—a stark 50% decline from the initial estimate of 2.4%. Retail sales have also taken a hit, declining in October for the first time since March 2023.
Adding to the economic woes is the resumption of student loan payments—the first since the pandemic began. As the average monthly student loan payment hovers around $500, consumers also grapple with the record-high median home payment of $3,000/month.
October saw a downturn in car and furniture sales, falling 1.1% and 2.0%, respectively. These indicators collectively point to a growing financial strain on consumers. Market analysts emphasize that the return of student loan payments and the underestimated impact of rising interest rates could exacerbate the economic downturn, leaving consumers to bear the brunt of the economic challenges ahead.
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Title: “Economic Storm Warning: Recession Looms as Manufacturing Plummets for 14th Month, Jobless Claims Skyrocket!”
In a chilling economic forecast, manufacturing orders have hit a recessionary low for a staggering 14 months. This alarming trend, reminiscent of the 1980s double-dip recession, is accompanied by a nationwide surge in initial jobless claims—California alone witnessing a jaw-dropping 14,000 spike. As the GDPNow model slashes growth estimates to 1.2% (a staggering 50% drop from the initial 2.4% estimate), the return of student loan payments and rising rates paint a grim picture for consumers. Brace for impact as car sales drop by 1.1%, furniture sales by 2.0%, and the once-robust market underestimates the impending economic storm.
Sources:
Manufacturing new orders have been at recessionary levels now for 14 consecutive months.
⁰The only other time this happened was during the highly stagflationary period of the double-dip recession in the 1980s. pic.twitter.com/RLQFZzOpQP— Otavio (Tavi) Costa (@TaviCosta) December 7, 2023
Steepening before recession
By Doubleline pic.twitter.com/NPY9WfnnHu
— Win Smart, CFA (@WinfieldSmart) December 5, 2023
Job data is lagging, the situation might be worse than the market perceives.
Unemployment rate remains strong for now. pic.twitter.com/5oZrkqIaVL
— Phoenix Capital (@PhoenixCapitalH) December 7, 2023
% of companies with strong/healthy Altman Z-scores (which combine account profitability, leverage, liquidity, solvency, activity ratios, etc. to measure bankruptcy risk) has dropped below 10% for first time on record per @fathommacro @opinion pic.twitter.com/YGh0mQ7aJe
— Liz Ann Sonders (@LizAnnSonders) December 7, 2023
The % of companies facing imminent bankruptcy has reached an all-time high pic.twitter.com/0JqQGhh0g5
— Barchart (@Barchart) December 7, 2023
On December 7, the #GDPNow model nowcast of real #GDP growth in Q4 2023 is 1.2% down -50% from the first estimate of 2.4%
–@AtlantaFed pic.twitter.com/wKwJbD3u8m
— The Coastal Journal (@1CoastalJournal) December 7, 2023
The return of student loan payments comes at a particularly unique time.
After $4+ trillion of stimulus and 0% rates, consumers are feeling a shock.
We expect further pressure on consumer spending into 2024.
Follow us @KobeissiLetter for real time analysis as this develops.
— The Kobeissi Letter (@KobeissiLetter) December 7, 2023
Jobless Claims Data Surges (And Falls) With Seasonal Hiring At Decade Lows
Recent labor data reveals concerning trends: jobless claims remain flat but surged non-seasonally, with a sharp rise in California. U.S. employers significantly increased job cuts in November, and seasonal hiring hit a decade low, indicating a cooling labor market. Experts predict further layoffs, suggesting a troubling outlook for employment stability as the year ends.
The Jobs Boom Is Clearly Behind Us, So What’s Next?
The labor market is deteriorating, evidenced by ADP and BLS reports showing significant declines in key sectors and slowing wage growth. Job quits have plummeted, signaling a stagnant job market. This downturn is exacerbated by troubles in manufacturing, commercial real estate, and a stressed housing market with unaffordable prices. These factors paint a bleak economic picture, with the Federal Reserve facing a precarious situation and the potential for further policy missteps.