Indicators US economic system is headed for recession


Joining me now to talk about these less than Stellar numbers we have John Carney Breitbart economics and finance editor and co-author of the Breitbart business digest and Joe lavornia Chief Economist SMBC former National Economic Council Chief Economist at the White House and a senior fellow at afpi all right gentlemen um.

These are not good numbers I will begin with you Joe lavornia what does it tell you about the fourth quarter and what does it tell you about the first quarter and by the way if I can get this out hold on one second you got some layoff announcements today 18 000 layoffs at Amazon 11 000 at meta.

Facebook 10 000 at Microsoft which is really a fabulous company 8 000 it's Salesforce Goldman Sachs having big layoffs too so we may see some softer employment numbers but uh Joe Livonia how bad is this story first I'll have a little bit of a bone to pick with you we have an inflationary recession in the first half of 22. that is true now.

We're going now to answer your question we are going to have a more traditional recession uh sometime starting soon deflationary deflationary recession the um because the production numbers very seldom Larry if you looked have we not had recession or been in recession when production is done eight percent annualized the housing Market's already.

In recession and we see that in housing starts Builders sentiment permits housing sales Etc so that's a more traditional downturn when it begins it's hard to to say my guess is sooner than later the bond market is behaving as such we've had a massive rally in 10-year yields the curve remains very inverted the market is starting the.

Price easing later this year so it's going to get ugly will the fourth quarter of last year be negative is that possible with these numbers no because the arithmetic and where the growth got weak as we went through the quarter so the ISM Manufacturing weekend in November December production was soft but this is.

A point I may have made to you before if you look at this last the six last recessions the economy grew over three percent right before the economy tipped over so even if growth looks good in Q4 it tells us nothing about where we're going but it kind of looks like John Carney um sequentially November worse than.

October December worse than November and so everyone's interested in what happens in this year and we got it we got a hint of going to happen in January well we got a hint of this from the Empire State manufacturing survey from the New York fed that thing fell off a cliff it was much worse than anybody thought it went from a negative 11 I think on the.

General business to negative 32. so this thing was a wreck so it's telling us that the industrial production numbers we're looking at for December are probably getting worse in January right now and you're right it got worse you can see it in all throughout the economy in October retail sales were higher than they were in November which were higher.

They were in December so what we're seeing is this slide towards recession happening across the economy so wait let's just think about this um we know in January both isms manufacturing and services were down is that right January but we only really have one survey number out of January so far.

That's the New York failure but we you know we'll see manufacturing left in New York there is manufacturing that's kind of your joke right but no but it is uh what we're looking for now is confirmation from the Philly fed survey that's the most important one it has the longest history it best reflects what's going on around the country so if it's.

Just New York that might not be you know recession right away I was in the second half of your recession because the labor market was doing so well the numbers today have me worried that it's coming much faster than we thought so Joe lavornia you will tell us that the hope for a soft Landing is out the window and are you certain of that no I'm not well.

I I think the hope for a soft Landing is probably out the window given the fact leading indicators have turned over we're at an inflection point if however China reopenings you get the supply side benefit of Supply chains opening up more and the FED pivots I don't think they'll make the Trump tax cuts permanent if there's some sort of fiscal deal if.

There's a recession but it seems to me while a recession is by far the likely case it doesn't have to be deep it kind of depends what the policy response is as recession takes hold If the Fed decides wants to keep rates high or we come up with some idiotic fiscal plan then we can make it worse what would what should Washington do John Carney I.

Mean what should they do I think the FED really should not look at these numbers and decide that inflation is defeated we have had a couple months two months now of soft inflation numbers that's happened in the past and then you get inflation coming right back if the FED looks like it's going to step back so the FED should not at all why is gold.

Booming and the dollar falling speaking of an inflation recovery I mean I don't know what all that means you have a deeply inverted curve short rates way above long rates now okay that's a negative sign Joe is right the index of leading indicators plunging basic quickly the M2 money supply plunging but I would gold is soaring I mean I haven't.

Looked at it today I've been busy today but it's overnight it's got up almost 300 in the last month or two um oil looks like it's rallying what's that all about so I think one of the things that's going on is when the China reopening is having people think okay it's for real people were not confident about this so that's so that explains.

The oil story very well there's the oil demand from China was way down it still might be down more than people expect it to be and I think that's also the sort of the search for alternative currencies that's going on around the world is probably driving up the price of gold we had Saudi Arabia say this week that yeah they're open to being paid and things.

Other than dollars well if you can't have if you don't have if you don't want dollars maybe you want gold to be able to pay off your you know oil debts General warn you what do you want the government to do stand back and stay out you were the NEC Chief Economist in the White House what should go okay here's what I mean I'll.

Be I'll be maybe we may need an economic rescue this year it may come maybe coming unlike gangbusters so what should government do okay well the question I was going to say to you it would be great if we actually figured out the cost benefit of certain regular regulations we did that under President Bush 43 where they went systematically.

Through what's effective what's not because it seems like oftentimes we do things Without Really any thought as to whether or not the situation he was a big deregulator uh but I look the fed the reality Larry is as much as we might beat up the administration deservedly so the current one the fact is the Fed has a lot to blame here because they were.

Way too slow in raising rates way too slow in reducing that balance sheet way too slow in keeping emergency rates in place and now they swung the other way so I like the fed I'm more much more pessimistic or much more less worried about inflation than say you maybe John I want the FED to ease rates I don't want the FED to control the.

Economy can I just say that I just think it's a Wall Street Affliction fed fed fed fed fed fed fed okay I understand they have powerful influence but so is fiscal policy taxes and spending and regulation we get to vote for those things or you know at least the people who enact them but we don't get to decide you know who's on the fence I.

Mean I think these crazy climate change policies are we're depleting the Strategic petroleum Reserve which was stupid but in general climate policies radical climate policies have damaged this economy they've damaged the energy sector okay regulatory policies you've got this crazy woman at the Federal Trade Commission who now wants.

Non-compete contracts to be off the board she's Waging War against all of American Business right what's her name Lionel Khan do I have that right all right she look at you know what she's doing um look at what ferc is doing you can't build a new pipeline for example all these things add up they should be.

Reverse and pressure was coming uh just this week time to go along with Davos on banks a report was put out basically yelling at the banks for continuing to provide financing to fossil fuels they singled out and Bank of America a group called reclaim Finance which I believe is like a French non-government organization I tried to look into it I.

Can't find where the money comes from so that you know it is a shadowy climate change pressure group but they put out these reports and then they get reported in the American Media as if banks had done something wrong right by you know continuing to finance fossil fuels I mean we need to roll back anti-growth policies to California that has.

Something to do with this yeah I know the Fed was late to the game but remember in many ways it was fiscal policy forcing monetary I mean literally the government was stuffing bank accounts with all this extra cash and that chicken came home to roost in the form of higher prices and then the Fed accommodate it monetize it now they're.

Taking it back I get all that but I think fiscal policy has to change we've got a guy we're just going to talk about that later in the show with chip Roy from the new house Republican majority but I think fiscal I mean we we're going to have to save the economy this year this thing if these numbers are apocryphal okay maybe they're going to.

Miraculously rise in January but if they don't then this recession is going to come on a lot faster than people thought a lot harder and maybe a lot deeper Washington's going to respond to that and when you see those retail sales numbers uh that were down so much think about what that's going to do to the inventory adjustment in the first.

Quarter of this year it's going the businesses are going to be left over with a ton of unexpected inventory so they're going to be selling that off that's going to be a downside for the GDP as well what fun what fun Jesus gotta have a job by the way folks if you have a job keep your job all right put your shoulder to it and keep your job.

Anyway John Carney thank you Joe Borneo thank you Joe just to look because he's smiling he got it right he got the recession story completely right look at him he can't help himself

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3 thoughts on “Indicators US economic system is headed for recession

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