Several economic indicators traditionally linked to predicting recessions are currently flashing warnings amidst ongoing uncertainty.
The latest concerning trend is emerging in the labor market, where permanent job losses are accelerating significantly. This was highlighted by investment research platform Game of Trades in a recent post. Historical data shows that substantial increases in permanent job losses have consistently preceded recessions since 1995.
According to Game of Trades, “A big spike in this indicator has ended in recessions since 1995. Job losses have been accelerating aggressively.”
Recent data indicates that year-over-year permanent job losses have surged to levels seen during the Dot-Com bubble, the Financial Crisis, and the COVID-19 pandemic, raising concerns about a possible recession in the second half of 2024.
Additionally, potential mass layoffs by U.S. corporations further underscore the issue. Data from AlphaSense shows a clear upward trend in mentions of “operational efficiency” over nearly two decades, suggesting that U.S. public companies are increasingly focusing on this concept. The most significant rise in mentions occurred from 2020 onwards, peaking in 2024, which could signal imminent job losses.
Despite these warning signals, the markets are still displaying bullish momentum. However, macroeconomist Henrik Zeberg has cautioned that the U.S. economy may be heading towards one of the worst recessions in history. Zeberg pointed out that this could happen following a period of bullish momentum in both the stock and crypto markets.
Zeberg also projected an impending crash in two-year Treasury yields, potentially signaling a recession comparable to the Great Depression of 1929.
The primary speculation now revolves around the timing of the recession, with many predicting it could hit in the second half of 2024. The upcoming Federal Reserve interest rate decision is expected to play a crucial role during this period.
