7 ms·

Expectations data indicate the US is entering recession about now

58 points by holonomically 5y ago

sleepysysadmin 5y ago
Recession is by definition 2 quarters of negative gdp growth. https://tradingeconomics.com/united-states/gdp-growth https://tradingeconomics.com/united-states/gdp-growth Literally by definition not even on the brink of a recession.
WarOnPrivacy 5y ago
Having millions of people at genuine risk of homelessness (little availability or affordability) does a lot to undercut faith in the economy. Same goes for people who are suddenly paying well over 50% of their income on housing.
- xvilka 5y ago
  It surprised me, that in so many countries and cities the price of apartment, flat, or house increased significantly (often almost doubled) over last two years. It either reflects raw inflation, or, for some unknown reasons, growing value. If anything, you would expect either prices keeping roughly the same level or falling.
  - swiley 5y ago
    It's part of having high immigration rates combined with our zoning laws.
  - beambot 5y ago
    Don't forget declining interest rates.
  - deleted 5y ago
    [deleted]
  - GoOnThenDoTell 5y ago
    WFH workers want home office. It’s not like the housing supply changed, but the demand very suddenly did
    - deleted 5y ago
      [deleted]
  - yCombLinks 5y ago
    The mortgage rate before the 2008 crisis was floating around 6.5%. The mortgage rate in 2020 dropped all the way below 2.75%. https://fred.stlouisfed.org/graph/?g=NUh https://fred.stlouisfed.org/graph/?g=NUh A mortgage rate of 6.5% has a monthly payment of $1977 if a house is $300k with a 20% down payment. Most people make their financial decisions based on short term ability to pay. At 2.75% that same $1977 will pay a monthly mortgage on a 410,000 house (assuming a 20% down payment) https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment https://www.nerdwallet.com/mortgages/mortgage-calculator/cal... . People are willing to pay more because they can afford more per month, and outbid people that will not match those prices.
    - yCombLinks 5y ago
      There is also the fact that investors can get a higher rate of return by buying and managing a rental property rather than selling a mortgage, so that money is also competing to own the property. I personally feel we are in a bubble, that will pop less explosively than the 2008 bubble.
  - JanisL 5y ago
    Currency debasement combined with low interest rates in nominal terms combined with extremely negative interest rates in real terms is driving a huge portion of the nominal gains in housing everywhere in the last few years. If housing is operating in a bubble the prices can continue to go up without fundamentals supporting it for quite a long time. There's also a huge number of policy decisions that have been made to prop up the real estate market. See Evergrande's issues lately for how this can eventually end up playing out when the new money stops coming in and the regulatory framework changes regarding leverage (in this case the three red lines policy changes forcing deleveraging).
  - MattGaiser 5y ago
    Growing value. With WFH, people are demanding more living space. I know DINK couples buying 4 bedroom detached homes rather than their former 1 bedroom condos. If I buy a place anytime soon, it will likely be 3 bedroom for an office and a guest space if a friend who also WFH comes to visit.
throw0101a 5y ago
This article is from October, but people have been looking at the most recent survey results form UMichigan, and found the details… interesting. Specifically that expectations are highly correlated with how people self-identified politically. For example, Republicans have worse sentiments about the economy now than they did in March 2009, when the unemployment rate was 8.7%: * https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE And the economy was losing 800K jobs per month: * https://fred.stlouisfed.org/graph/fredgraph.png?g=IXam https://fred.stlouisfed.org/graph/fredgraph.png?g=IXam The UMichigan folks call out this this partisan lens explicitly: * http://www.sca.isr.umich.edu http://www.sca.isr.umich.edu And while (some) folks have negative view on the economy (depending on their political leanings), there is a general positive feeling on their personal finances: * https://www.langerresearch.com/category/cci/ https://www.langerresearch.com/category/cci/ And if people are worried about the economy like they say, you'd think they'd be saving. Yet US retail sales are up: > US Retail Sales hit another all-time high while Consumer Sentiment is at its lowest level in 10 years. […] * https://twitter.com/charliebilello/status/1460632395086974981 https://twitter.com/charliebilello/status/146063239508697498... * https://twitter.com/TheStalwart/status/1460601503744466944 https://twitter.com/TheStalwart/status/1460601503744466944
- elhudy 5y ago
  Are jobs and employment rates really what we should be using to measure the economic outlook? Some people would be better off unemployed on government help, than employed full time at minimum wage in a city where housing is unaffordable and inflation is at 5%. Additionally, increased spending can be a symptom of inflation as consumers rush to buy goods where prices lag.
  - abfan1127 5y ago
    how is this statement remotely true? Now is government help better than min wage? housing is still unaffordable and inflation is still 5%. There is no wealth creation on government assistance. In fact, there is wealth destruction.
    - 5y ago
MeinBlutIstBlau 5y ago
I just feel like ridiculously low interest rates, increased "buy now pay later" payment plan apps or services, tangibly worthless NFTs and cryptocurrencies, and a huge goods and wage inflation in such a short time is enough to explain were heading straight for another 1929. It's like a train that can't stop and the fed is desperately trying to preventing it from derailing. It's just a matter of what cause the derailment. Thank jesus I work for a major public utility...
marcosdumay 5y ago
I am yet to see some place enter a recession while workers are mass quitting because they have better offers elsewhere. (Yes, labor participation is low, so this one time things are really confusing.)
- t-writescode 5y ago
  > because they have better offers elsewhere. It's another new minimum wage job where they're not being treated horribly, potentially
  - dboreham 5y ago
    Employers can't hire at minimum wage now. Signs in every store window offering $21/hr starting, around here.
    - MattGaiser 5y ago
      Where is "here"?
      - Beached 5y ago
        it's not the same here, but I see 18-20/h all over the rust belt
    - t-writescode 5y ago
      Good. And now that lots of them are offering higher wages, hopefully they won’t treat them terribly either.
  - marcosdumay 5y ago
    It doesn't really matter what kind of improvement they get. Places get into recession while¹ workers are let go, have hours reduced, or settle into lower salaries. When work conditions are stable, you don't see a recession. When they are improving, you really don't see it. (But yeah, things in the US are confusing enough right now that this may be an exception.) 1 - The causality here is highly complex and circular, so there is no "because of".
esalman 5y ago
Is buying a house the most sensible option for someone sitting on enough cash for down payment? Or should they rent and invest the cash somewhere? Especially if they are risk-averse and not familiar to hands-on investing?
- bkjelden 5y ago
  Make real estate purchasing decisions based on your own life situation, not whether or not you think you can successfully time the market.
  - FooBarBizBazz 5y ago
    This is why I wish someone would give me a fixed-rate 30-year mortgage to buy ETFs with 5x leverage. ETFs are portable.
- Nbox9 5y ago
  Both buying a house and investing elsewhere are very sensible options.
- forgotmyoldname 5y ago
  Nobody really knows what'll happen with housing. There are a lot of people dumping in cash, hoping to double their investments in a span of a couple years. Many are successfully doing this. There is also a growing percentage of people who are being completely priced out of housing due to it becoming a wealth exchange among the rich. Can housing prices keep growing infinitely with fewer and fewer actual people buying them? When the last recession hit, a lot of people thought no, it can't happen and things will level out from here on. It turns out prices did simply keep going up and up.
- carom 5y ago
  In my opinion yes. I'll caveat that everyone's situation is different. That said, I think holding debt right now is great. Interest rates are low so a ton of money has been fleeing the bond market pumping stocks. It's not the companies getting more valuable, just more people entering chasing yield, reducing your earnings per share. I think the current inflation is due to pandemic stimulus and will pass, but holding cash long term is never a good option. I think we will stay in a low interest rate period for a while (2030?), then to get out of it the government will inflate the currency. The justification for this is in the next crisis they won't have room to lower interest rates so they will print money instead. When this inflation occurs, holding debt is great because it gets inflated away. As well, real estate has traditionally kept pace with inflation, so it is a good place to park your money. I personally just dumped a ton of money into real estate with this justification. I wasn't happy with how other investments looked. Obviously it depends where you are in life, if you plan to stay for a while, all that. Location also matters, LA real estate is a bit different from Baltimore. Right now debt is cheap and in the future it will get inflated away so that's what I'm banking on.
jewelry 5y ago
I think it's about expectation. If everyone expected worse, and have restored confidence now that future would be better and ready to spend and plan growth, then the economy would start to recover/expand.

58 points by holonomically 5y ago

Recession is by definition 2 quarters of negative gdp growth. https://tradingeconomics.com/united-states/gdp-growth https://tradingeconomics.com/united-states/gdp-growth Literally by definition not even on the brink of a recession.

WarOnPrivacy 5y ago

Having millions of people at genuine risk of homelessness (little availability or affordability) does a lot to undercut faith in the economy. Same goes for people who are suddenly paying well over 50% of their income on housing.

xvilka 5y ago
It surprised me, that in so many countries and cities the price of apartment, flat, or house increased significantly (often almost doubled) over last two years. It either reflects raw inflation, or, for some unknown reasons, growing value. If anything, you would expect either prices keeping roughly the same level or falling.
- swiley 5y ago
  It's part of having high immigration rates combined with our zoning laws.
- beambot 5y ago
  Don't forget declining interest rates.
- deleted 5y ago
  [deleted]
- GoOnThenDoTell 5y ago
  WFH workers want home office. It’s not like the housing supply changed, but the demand very suddenly did
  - deleted 5y ago
    [deleted]
- yCombLinks 5y ago
  The mortgage rate before the 2008 crisis was floating around 6.5%. The mortgage rate in 2020 dropped all the way below 2.75%. https://fred.stlouisfed.org/graph/?g=NUh https://fred.stlouisfed.org/graph/?g=NUh A mortgage rate of 6.5% has a monthly payment of $1977 if a house is $300k with a 20% down payment. Most people make their financial decisions based on short term ability to pay. At 2.75% that same $1977 will pay a monthly mortgage on a 410,000 house (assuming a 20% down payment) https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment https://www.nerdwallet.com/mortgages/mortgage-calculator/cal... . People are willing to pay more because they can afford more per month, and outbid people that will not match those prices.
  - yCombLinks 5y ago
    There is also the fact that investors can get a higher rate of return by buying and managing a rental property rather than selling a mortgage, so that money is also competing to own the property. I personally feel we are in a bubble, that will pop less explosively than the 2008 bubble.
- JanisL 5y ago
  Currency debasement combined with low interest rates in nominal terms combined with extremely negative interest rates in real terms is driving a huge portion of the nominal gains in housing everywhere in the last few years. If housing is operating in a bubble the prices can continue to go up without fundamentals supporting it for quite a long time. There's also a huge number of policy decisions that have been made to prop up the real estate market. See Evergrande's issues lately for how this can eventually end up playing out when the new money stops coming in and the regulatory framework changes regarding leverage (in this case the three red lines policy changes forcing deleveraging).
- MattGaiser 5y ago
  Growing value. With WFH, people are demanding more living space. I know DINK couples buying 4 bedroom detached homes rather than their former 1 bedroom condos. If I buy a place anytime soon, it will likely be 3 bedroom for an office and a guest space if a friend who also WFH comes to visit.

throw0101a 5y ago

This article is from October, but people have been looking at the most recent survey results form UMichigan, and found the details… interesting. Specifically that expectations are highly correlated with how people self-identified politically. For example, Republicans have worse sentiments about the economy now than they did in March 2009, when the unemployment rate was 8.7%: * https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE And the economy was losing 800K jobs per month: * https://fred.stlouisfed.org/graph/fredgraph.png?g=IXam https://fred.stlouisfed.org/graph/fredgraph.png?g=IXam The UMichigan folks call out this this partisan lens explicitly: * http://www.sca.isr.umich.edu http://www.sca.isr.umich.edu And while (some) folks have negative view on the economy (depending on their political leanings), there is a general positive feeling on their personal finances: * https://www.langerresearch.com/category/cci/ https://www.langerresearch.com/category/cci/ And if people are worried about the economy like they say, you'd think they'd be saving. Yet US retail sales are up: > US Retail Sales hit another all-time high while Consumer Sentiment is at its lowest level in 10 years. […] * https://twitter.com/charliebilello/status/1460632395086974981 https://twitter.com/charliebilello/status/146063239508697498... * https://twitter.com/TheStalwart/status/1460601503744466944 https://twitter.com/TheStalwart/status/1460601503744466944

elhudy 5y ago
Are jobs and employment rates really what we should be using to measure the economic outlook? Some people would be better off unemployed on government help, than employed full time at minimum wage in a city where housing is unaffordable and inflation is at 5%. Additionally, increased spending can be a symptom of inflation as consumers rush to buy goods where prices lag.
- abfan1127 5y ago
  how is this statement remotely true? Now is government help better than min wage? housing is still unaffordable and inflation is still 5%. There is no wealth creation on government assistance. In fact, there is wealth destruction.
  - 5y ago

MeinBlutIstBlau 5y ago

I just feel like ridiculously low interest rates, increased "buy now pay later" payment plan apps or services, tangibly worthless NFTs and cryptocurrencies, and a huge goods and wage inflation in such a short time is enough to explain were heading straight for another 1929. It's like a train that can't stop and the fed is desperately trying to preventing it from derailing. It's just a matter of what cause the derailment. Thank jesus I work for a major public utility...

marcosdumay 5y ago

I am yet to see some place enter a recession while workers are mass quitting because they have better offers elsewhere. (Yes, labor participation is low, so this one time things are really confusing.)

t-writescode 5y ago
> because they have better offers elsewhere. It's another new minimum wage job where they're not being treated horribly, potentially
- dboreham 5y ago
  Employers can't hire at minimum wage now. Signs in every store window offering $21/hr starting, around here.
  - MattGaiser 5y ago
    Where is "here"?
    - Beached 5y ago
      it's not the same here, but I see 18-20/h all over the rust belt
  - t-writescode 5y ago
    Good. And now that lots of them are offering higher wages, hopefully they won’t treat them terribly either.
- marcosdumay 5y ago
  It doesn't really matter what kind of improvement they get. Places get into recession while¹ workers are let go, have hours reduced, or settle into lower salaries. When work conditions are stable, you don't see a recession. When they are improving, you really don't see it. (But yeah, things in the US are confusing enough right now that this may be an exception.) 1 - The causality here is highly complex and circular, so there is no "because of".

esalman 5y ago

Is buying a house the most sensible option for someone sitting on enough cash for down payment? Or should they rent and invest the cash somewhere? Especially if they are risk-averse and not familiar to hands-on investing?

bkjelden 5y ago
Make real estate purchasing decisions based on your own life situation, not whether or not you think you can successfully time the market.
- FooBarBizBazz 5y ago
  This is why I wish someone would give me a fixed-rate 30-year mortgage to buy ETFs with 5x leverage. ETFs are portable.
Nbox9 5y ago
Both buying a house and investing elsewhere are very sensible options.
forgotmyoldname 5y ago
Nobody really knows what'll happen with housing. There are a lot of people dumping in cash, hoping to double their investments in a span of a couple years. Many are successfully doing this. There is also a growing percentage of people who are being completely priced out of housing due to it becoming a wealth exchange among the rich. Can housing prices keep growing infinitely with fewer and fewer actual people buying them? When the last recession hit, a lot of people thought no, it can't happen and things will level out from here on. It turns out prices did simply keep going up and up.
carom 5y ago
In my opinion yes. I'll caveat that everyone's situation is different. That said, I think holding debt right now is great. Interest rates are low so a ton of money has been fleeing the bond market pumping stocks. It's not the companies getting more valuable, just more people entering chasing yield, reducing your earnings per share. I think the current inflation is due to pandemic stimulus and will pass, but holding cash long term is never a good option. I think we will stay in a low interest rate period for a while (2030?), then to get out of it the government will inflate the currency. The justification for this is in the next crisis they won't have room to lower interest rates so they will print money instead. When this inflation occurs, holding debt is great because it gets inflated away. As well, real estate has traditionally kept pace with inflation, so it is a good place to park your money. I personally just dumped a ton of money into real estate with this justification. I wasn't happy with how other investments looked. Obviously it depends where you are in life, if you plan to stay for a while, all that. Location also matters, LA real estate is a bit different from Baltimore. Right now debt is cheap and in the future it will get inflated away so that's what I'm banking on.

jewelry 5y ago

I think it's about expectation. If everyone expected worse, and have restored confidence now that future would be better and ready to spend and plan growth, then the economy would start to recover/expand.