Recession Watch

by | Dec 21, 2022 | General

The most well advertised recession in history

The consensus in the stock market appears to be that a recession in 2023 is a near certainty. We agree, but will it be an economy-wide recession or one that is confined to certain sectors of the economy, such as housing?

The current economic background is certainly a strange set-up for a recession: Low unemployment, rising wages, and strong consumer spending. Below is a chart of “Adult Unemployment” (leaving out teenagers) at 3.3%. The chart goes back to 1954 showing that this number is about as good as it gets.

Wages are up, as the chart below illustrates. This is often seen as an indicator of inflation, but worker shortages have been with us for years. Businesses are bidding up wages to attract workers–not an indicator of a weak economy.

And those workers making more money are supporting consumer spending, now at an all time high as the following chart shows. 

Our primary source of economic data and opinion comes from Yardeni Research—the source of the charts we often use. They are predicting a mild recession over-all with specific industries suffering more than others. We mentioned housing above and there are others, but none result in massive unemployment, which is the hallmark of an old-fashioned recession.

Recessions don’t happen because investors believe one is coming. They happen when businesses lay-off thousands of workers resulting in lower consumer spending. With millions of unfilled jobs, and workers willing to quit in order to find a better job elsewhere, the traditional signs of recession just aren’t there.

Best regards,

Daniel A. Ogden

Dock Street Asset Management, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Dock Street Asset Management, Inc.

It is published solely for informational purposes and is not to be construed as a solicitation nor does it constitute advice, investment or otherwise.

To the extent that a reader has questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional advisor of their choosing.

A copy of our Form ADV Part II regarding our advisory services and fees is available upon request.

Our comments are an expression of opinion. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Past performance is no guarantee of future returns.