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.
Daniel A. Ogden