Did we just avoid a recession?

Did We Just Avoid a Recession?

Non farm payrolls rose by 254,000 in September from 159,000 in August all while unemployment fell to 4.1%.

Now you might be saying to yourself that’s great but did we avoid a recession?

Well to determine the future we must look at the past… so let’s look at the unemployment rate leading into the 2008 financial crisis and and compare it to today’s data.

So did we avoid a recession?

As we saw during the 2008 financial crisis, the unemployment rate fluctuated from month to month leading up to the crisis. There were slight increases in unemployment before the major economic downturn occurred.

So, no we have not avoided a recession and here is why…

When the Fed raises interest rates there is about a 14 - 18 month lag before you can start seeing it in the data in consumer delinquency which puts immense pressure on the economy.

And considering the Fed only stopped raising interest rates in July of 2023… we will not know the full affects until the September of 2025.

So Where do we go from here?

The U.S. Federal Reserve bases its decisions on historical data rather than speculating about future events. As a result, they are often reacting to conditions after they have already developed, which can put them in a position of always playing catch-up. So, what can we expect moving forward...?

1. We can expect the US federal reserve to lower interest rates but at a slower pace most likely at 25bps per meeting for the foreseeable future.

2. Expect consumer delinquency to rise until late next year.

3. Expect asset prices to rise for the foreseeable future. As there will be a significant amount of liquidity pumped into the markets.

   Best,

   Josh MacPherson