Data, data, everywhere: Three-minute macro

Data is our word of the month. Despite some surprising signs of economic resilience in the United States, our leading indicators still have us convinced a recession is on the way. Meanwhile, we don’t think the strong unemployment rate is a perfectly accurate description of the current (and future) labor market. Finally, the S&P 500 Index is looking strong so far this year, but we dive into how much of that performance is due to the AI craze.

The recession call stands

The “soft landing” narrative is gaining steam as some U.S. housing data has surprised to the upside and the much-predicted recession has yet to materialize after months of many highlighting the risk. While it’s certainly more fashionable to throw out one’s recession call, we don’t feel comfortable ignoring the significant downside risks to the U.S. economy. Our forecast still calls for a U.S. recession to begin in the second half of 2023 and we have high conviction in that outlook.

That conviction comes directly from the data: Our set of leading indicators continues to flash deeply red. Certainly, the exact timing of the recession (does it begin in Q3? Q4? Maybe even Q1 2024) requires some subjective interpretation. And this recession may have some characteristics that are different than those from the past—persistent labor shortages may mean the unemployment rate rises by less than in the past. But our forecasts are driven by data and models, and despite the recent headlines, the data continues to tell us one, clear thing: The risk of a recession is elevated.

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