Thursday, 16 January 2020

US Continuing Claims rise YoY - Predicting a Recession

US continuing claims YoY are interesting. 




When it has risen YoY mid-cycle like mid-80s and mid-90s the YoY rate can rise to +6-10% before the economy picks up and unemployment starts falling again.

But when it goes positive YoY, late cycle/ from a starting point of full employment, it has pretty much never risen YoY without a recession following.

For example the end of the 70s, end of 80s, end of 90s and 08, when it started rising from the lows we ended up with a recession. So it is a 100% hit rate late cycle recession indicator.

I have already said I think a recession scare should happen in Q1, and the December data is weakening.

But this time around, instead of the Fed being at 3-4%, they are at 1.5% and likely to panic cut, the US govt is also running a huge fiscal stimulus. I think EM growth can rebound later this year subject to reform and maybe even Europe. 

So it could be the first false recession signal, but I do think the data will get worse before any recovery.

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