Ten Rules of Thumb for Predicting Recession

1: The employment picture is worsening (slightly):

  • Initial claims up 56% from March low
  • Job postings on Indeed down 16% since Jan 1
  • Year-over-year change in average weekly hours is negative

Meanwhile, companies continue to announce layoffs:

2: A strong US dollar is pressuring Emerging Market governments that have heavy USD-denominated debts. This is because the cost of servicing this debt, in local currency terms, has become more expensive.

3: The populations of China, Japan, Russia and Brazil will shrink significantly this century. As illustrated by the experience in Japan, which has been in decline for years, a shrinking population is associated with persistent weak growth and a large liquidity trap, leading to low interest rates, low inflation and high government indebtedness.

4: While some may disagree, the US is technically in a recession, with two quarters of negative GDP growth. However you define a ‘recession’, the chart below shows 10 rules of thumb for predicting a downturn.

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