Jobs and Credit

Doing just fine

There has been a lot of recession talk. That makes sense because the yield curve inverted. But, we just had a good jobs report, so what gives:

I don’t see no recession uptick!?

Well, hold your horses doomers because there is still plenty of time until a recession could maybe hit. After all, the average time between a yield curve inversion and a recession is a year and a half. So, we have many many months of jobs reports to come between now and then.

If you squint your eyes though, you might see some weakness in other employment metrics:

There’s a slight dip there. And, a slight dip here:

But, this is nothing that screams recession just yet.

So, is the market being irrational? Not necessarily - stocks don’t just fall when unemployment rates go up. Sometimes stocks fall for other reasons or no reason at all (e.g., 1987).

In other recent market downturns with recessions, stocks hit bottom in March 2009 and March 2020 (side note: beware of March) and in both instances unemployment didn’t peak until later. However, in both cases, there were definitely signs of unemployment issues well before then.

Looking elsewhere, consumer credit, which showed a spooky rise a few months ago, is also stabilizing:

All that being said, stocks are down but the economy isn’t down quite yet. It will be eventually, it’s just a question of timing. One year? Ten years? A hundred years? I’m pretty comfortable taking at least the ten year bet.