powell tradersAP Photo/Mark Lennihan

  • Market watchers breathed a sigh of relief following the December jobs report, which some saw as a sign recession fears have been overdone.
  • But some still see warnings of a downturn.
  • Economists think the next recession, whenever it occurs, will be less severe than in 2008.

The latest labor market figures painted a standout picture of the US economy, soothing markets after months of recession talk from Wall Street to Washington.

But some think a downturn is actually more likely in light of the employment report, which showed the US added the most jobs since February and that wage gains accelerated at their fastest pace in nearly a decade.

“The surprisingly robust 312,000 rise in US non-farm payrolls in December soothed market jitters about an imminent recession,” said Albert Edwards, a Societe Generale strategist, in a research report. “But a quick look at history reveals accelerating payroll data is not untypical just ahead of recessions.”

Employment jumped sharply just ahead of the recent recessions that started in 2007 and 2001, he noted. This could be the case because employment reports point to current and past business conditions, according to economists, as opposed to future performance.

READ  Lenny Kravitz is thrilled his daughter Zoë and his ex-fiancee Nicole Kidman are working together on 'Big Little Lies' - US

Some see the steepening yield curve — seen as a potential recession indicator — as a signal that a slowdown might be less likely. But after partially inverting for the first time in more than a decade in December, Edwards said that too could be a warning.

READ  Betsy DeVos sued debt For Continuing To Collect Loans

“This curve steepening, after a period of pronounced flattening, is a good indication of imminent recession despite continued strength in the labour market,” Edwards added.

Following sharply lower consumer confidence and manufacturing figures out in the US last week, he’s far from alone in his recession predictions.

A Wall Street Journal survey out Thursday showed an increasing number of economists see a downturn on the horizon. More than half of those polled said they expect a downturn to begin in 2020, while about a quarter forecast one would start in 2021.

Regardless of when it might begin, market watchers widely agree the next recession will be more mild than the one a decade ago. While the financial crisis in 2008 was driven by record levels of debt, according to Russell Investments strategist Erik Ristuben, Americans today are not over-leveraged.

READ  These Uncommon Classic Auto Present Images Will Take You Again In Time - US

“Will the next US recession be as severe as the last? Highly unlikely,” he said. “From a recession standpoint, the Great Recession of 2008 was much more of an anomaly than a norm. The parallels between today’s economic backdrop and 2008 look to be few and far between.”

Now Read:

Volatility was supposed to be a lifesaver for stock pickers — here’s why it hasn’t been, and why that could be signaling more market pain

The best-performing investment of 2018 came as a shock to everyone — and the stars are now aligned for its continued dominance

LEAVE A REPLY

Please enter your comment!
Please enter your name here