Is a Recession Looming in 2023? Bond Yields, Job Openings and the “Rolling Recession” Meme
As the new year began, a recession in 2023 seemed to be the consensus. This was due to a year of high inflation, monetary tightening, and an inverted yield curve. January economic data, particularly the US employment report, caused some to delay expectations of a downturn or change their minds entirely. Still, if this cycle is declared a recession, it has already been in the works for months and could be over by spring.
Many economists anticipate a mild recession in 2023, however, it is far from certain. Steve Hanke, a former advisor to Ronald Reagan, recently ran a health check on the American economy and found that the bond market is not signalling a recession any time soon. Bond yield spreads relative to Treasuries suggest that no recession is expected in 2023 or 2024.
In addition to this, a new economic meme called “rolling recession” has been making the rounds. This is where various industries cycle through contraction and expansion, but the job market largely remains steady. Loyola Marymount University Economics Professor Sung Won Sohn explains it as “industries and sectors take turns going down, as opposed to declining more or less all at once.”
Yellen, the US Treasury Secretary, recently stated that “you don’t have a recession when the economy adds 500,000 last month.” At the end of last year, there were 11 million job openings. This is double the vacancies from a few years ago. Thus, the US is unlikely to enter a recession when employment is rising.
It is important to prepare for the unexpected and build an emergency fund. This is especially important in light of recent inflation that has raised the cost of living. Aim for an emergency fund of three to six months of expenses.
The US yield curve implies a recession is imminent, however, the jobs market disagrees. Recent bond-yield spreads are below the average seen in the five years prior to 2020, indicating economic strength.
Finally, the new CEO of FTX charged $690,000 for two months of work. This is a sign of the crumbling empire and Sam Bankman-Fried’s “old fashioned embezzlement.
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