Happy New Year!
As I mentioned in last week’s post, I am now on recession watch. Almost all of our recession indicators are blinking red, so I urge you to take steps to prepare. Of course, exactly what that means to you is entirely personal, and we should discuss it.
Last week, we got a look at manufacturing. The data improved somewhat, but US manufacturing is still in contraction. This week is important as we get a look at unemployment, a key input into the Federal Reserve’s rate policy. A point not widely discussed (until recently) is the number of long-term unemployed, which is up 50% since 2022. Many of these folks have pursued part-time work to help pay the bills and so may not even be considered formally “unemployed.” However, they are struggling nonetheless.
Again, this is just another indication that the underlying economy is not as strong as the headlines may lead us to believe.
Let’s Connect
The future is, of course, uncertain. Just because clouds are gathering doesn’t mean there is 100% chance of rain. So, too, it is with economic forecasting. Investors within five years of their goal, however, are particularly vulnerable to excessive portfolio losses and it may make sense to put on a raincoat.
Chart of the Week
One of the main rationales for strong economic growth over the past couple of years has been strong consumer purchases. Looking at the numbers, however, we see a very different story. After adjusting for inflation, growth in retail sales has been negative, on average, for the past two years (blue line in the chart below).
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