Finimize - 📉 Okay, here comes the recession

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Today's big stories

The US added fewer jobs than expected last month
Here’s how to protect your portfolio now this near-perfect indicator has predicted a recession – Read Now
Global dealmaking fell to its lowest level since the start of the pandemic last quarter

The Not-So-Great Resignation

What’s Going On Here?

Data out on Friday showed that the US added fewer jobs than expected last month, and companies are getting to a point where they’ll take what they can get.

What Does This Mean?

The US has beaten economists’ expectations for the last two months, but clearly it couldn’t handle the mounting pressure: the country posted 431,000 new jobs last month – some way shy of the 490,000 economists were expecting. And while that’s nothing to be sniffed at, there are still almost twice as many job openings as there are job seekers.

Still, let’s look at the bigger picture: the US added nearly 1.7 million jobs last quarter, which puts economists’ expectations to shame. What’s more, the proportion of people in or looking for work – known as the “labor force participation rate” – is back to within a hair’s breadth of pre-pandemic levels.

Why Should I Care?

The bigger picture: We’re spiraling.
Desperate times call for desperate measures: a near-record 49% of small US businesses raised salaries in March in an effort to fill their vacant roles, helping push the average hourly pay up 5.6% from the same time last year. Thing is, businesses will probably just pass those higher costs back onto customers by raising prices, and that potential “wage price spiral” could push up inflation and put more even pressure on the economy as a whole.

For markets: A recession is nearly inevitable.
Investors are worried that Friday’s strong data will encourage the Federal Reserve to push ahead with plans to raise interest rates multiple times this year, potentially even with bigger increases than the typical 0.25%. And since investors are aware of the short-term damage that could do to economic growth, they’re flocking to longer-term assets like 10-year bonds. In fact, demand for them pushed their yields lower than those of 2-year bonds on Friday. That “inversion” is as rare as it is foreboding: it’s historically been a sign of an imminent recession.

You might also like: The markets that could inherit a fortune from rising interest rates.

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Analyst Take

Could This Near-Perfect Recession Indicator Have It Wrong?

Stéphane Renevier, Analyst

What’s Going On Here?

Cue the dramatic duh-duh-duhhh: the “yield curve” briefly inverted last week.

That’s usually agreed to be a pretty unequivocal sign that the global economy is set to shrink, not least because an inversion has predicted all but one recession since the 1950s.

But some dissenting voices – the Federal Reserve among them – believe this time will be different. So, will it?

That’s today’s Insight: why the yield curve is such a reliable indicator of recessions, and whether you should believe what it’s telling you now.

Read or listen to the Insight here

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*The information provided in this article does not constitute investment advice, financial advice, trading advice or any other sort of advice and you should not treat any of this article’s content as such. You should carefully consider whether trading or holding Cryptocurrencies is suitable for you relative to your financial position. The price of cryptocurrency can go down as well as up and past performance is not a guide to future performance. Investors may not get back the full amount originally invested.

The information in this article is believed to be reliable. Dacxi has taken reasonable care to ensure the information stated is accurate. However, Dacxi makes no representation, guarantee or warranty that it is wholly accurate and complete. Do conduct your own due diligence and consult your financial adviser before making any investment decision.