- A recession is four times more likely to happen than an expansion, says economist David Rosenberg.
- Real retail sales and industrial production are flagging, a key signal a recession is around the corner.
- Labor-market data may also not be painting the full picture, Rosenberg said.
Economist David Rosenberg has been sounding the recession alarm in recent months, and he now thinks that the likelihood is much greater that the US sees a contraction this year.
The head of Rosenberg Research said he believes that a recession is four times more likely than an economic expansion, and it’s just a matter of time as more signals kick in until the recession narrative comes back into focus.
February’s consumer price index of 3.2% was hotter than expected, which has intensified inflationary worries but propped up expectations that many economists would throw recession into the towel as consumers keep spending and the economy remains on solid footing.
Yet, Rosenberg wasn’t deterred in his call.
“I feel like I’m Christopher Columbus in 1492 standing in front of Isabella Ferdinand, trying to tell them: No, the world isn’t flat,” he told CNBC in an interview on Monday.
The economist highlighted that real retail sales volumes are down 1.8% and industrial production is down 5.6% on an annual basis in the first quarter. The historical patterns show that such simultaneous contractions in real retail sales and production typically herald the arrival of an economic downturn.
[H]istorically, when that’s happening, unless it’s an aberration, you have a four times greater chance of being in a recession than in an expansion. So it’s just a matter of time before you know if the data flow continues the way it has the past couple of months. I think the recession narrative is going to come back, you know, in a, in a fuller view,” Rosenberg said.
He also pointed to the job sector, noting that even though the unemployment rate still appears low, there’s a “huge dichotomy” in job claims data.
“The spot claim numbers have remained exceptionally low, but it’s telling you that companies are not firing people. However, look at the backlog of continuing claims. They’ve continued to rise. And what that’s telling you is that it’s getting tougher and tougher for the backlog of unemployed to find a new job,” he said.
Rosenberg cast doubt on the household survey’s unemployment figure, arguing that all jobs created in the past year have been part-time, rendering many workers ineligible for unemployment insurance and potentially skewing the data downward.
“How can we be talking about a buoyant labor market when there has not been one net new full time job created in the United States over the 12 months of February? How do you square that circle to a narrative that we really have a robust labor market on our hands?” he questioned.
