...With ADP non-farm private employment change showing a disastrous 99k , a drop from 122k from the month before and 150k from two months ago, private sector employment is contracting very quickly.
...Tonight's NFP is stacked up against a big 164k market est. despite previous number coming in at just 114k. But the Govt sector could be stacking up employment to boost the number.
...any number tonight could just amplify the narrative which changes from month to month, as we saw, But the more important observation is the TREND, and private sector employment is trending sharply lower - Govts are doing everything to spend to avert recession that is already occurring in the private sector to provide an illusion of economic strength when it is further from the truth.
US to enter recession, says BCA Research
Timothy Moore
Miroslav Aradski, a strategist at BCA Research, said investors should brace for a recession in the US starting as early as the fourth quarter by paring back their equities holdings.
“We expect a recession in the US to begin towards the end of 2024 or early 2025,” Aradski said in a note called Anatomy of a Fall.
The strategist acknowledges that BCA’s view is out of consensus, yet he argues that recessions begin even when an economy is expanding enough that an immediate contraction is not on anyone’s radar.
“The path leading up to a recession is not always an orderly one,” Aradski said. “Nor is the slowdown characterised by a gradually increasing pace of deterioration spread over a long period of time.”
Among the key data BCA tracks are monthly jobs, with the August report set for release at 10.30pm AEST on Friday.
“When it comes to data releases, the star of the show is the monthly US payrolls report,” Aradski said. “Payroll growth can still look decent near the outset of a recession.”
In this cycle, payroll growth has already decelerated markedly, he noted. “Our sense is that a payrolls print below 120,000 would be regarded as troubling by the market (consensus is for a 165,000 job gain).”
3Fourteen Research says recession red flags are waving
Timothy Moore
Warren Pies, founder of 3Fourteen Research, said he still thinks that the US economy is heading towards a soft landing, where inflation cools and growth slows though remains positive.
Yet Pies said there are good reasons for investors to be on alert as the Federal Reserve is poised to pivot to interest rate cuts.
“The Fed Put is back. Unfortunately, so are genuine recession fears. What Mr Market gives with one hand (forward policy certainty) he takes away with the other (steady economic data). This is the way it always is.”
Pies also said while it’s “reassuring that the Fed, once again, has our back. The question now: Has the economy slipped too far? Will the pending cut cycle be too little, too late?”
Among the “red flags” that Pies sees are the August ISM manufacturing PMI index, which is still in contraction territory. In addition, the latest jobs openings, or JOLTS, data pointed to trouble in the construction sector. “Based on JOLTS, construction job openings plummeted to 248,000 in July. This brings construction job openings down to levels last seen in 2020.”
Pies said he views residential construction jobs as his “source of truth” on the economy because losses of these jobs “lead” to modern recessions.
“Starting in 2021 through most of 2023, our models indicated that the housing construction industry was understaffed by as many as 80,000 workers. Now, with units under construction plunging across structure type, the model suggests that the industry is overstaffed by more than 50,000 employees.
“It seems an inflection point is coming,” Pies said. “If housing activity does not pick up soon (and rather dramatically), there will be layoffs, negative payroll revisions, or both. History, and our framework, says that a recession would follow.
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