Recession Signals Highlighted as U.S. GDP Growth Stagnates
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As the Federal Reserve continues to see weakening GDP growth, a new report from Bloomberg News suggests a hidden recession signal for the United States. The Atlanta Federal Reserve’s GDPNow calculation, which uses large data sets to make real time GDP predictions, sees just 0.3% GDP growth in the first quarter of 2016, far below many analysts and economists’ expectations.
The Federal Reserve highlighted a decline in real residential investment growth from a Census Bureau study, which saw just 8.5% growth versus previous 9% projections.
As the Federal Reserve continues to see weakening GDP growth, a new report from Bloomberg News suggests a hidden recession signal for the United States. The Atlanta Federal Reserve’s GDPNow calculation, which uses large data sets to make real time GDP predictions, sees just 0.3% GDP growth in the first quarter of 2016, far below many analysts and economists’ expectations.
The Federal Reserve highlighted a decline in real residential investment growth from a Census Bureau study, which saw just 8.5% growth versus previous 9% projections.
Weak Housing Data
That data point conflates with a recent decline in homebuilder confidence, as the National Association of Home Builders recently announced weaker expectations from homebuilders, as demand remains sluggish. Current sales conditions fell 3%, according to the study.
Another weak indicator of housing came from a study of housing starts, also by the Census Bureau. That study saw an 8.8% decline in privately owned housing starts in March versus the prior month, with single-family housing starts were down 9.2% from the prior month.
The decline is counter-cyclical, as warmer weather usually drives housing starts upward at the end of winter.
Hints of a Recession
The weakness in home buying has long been attributed to weak or negative wage growth for middle class Americans and a secular shift towards lower-paying jobs. According to Bloomberg’s Rich Miller, data buried in the Federal Reserve’s labor market index shows a secular decline in the job market that is masked by improvements in the headline unemployment rate, which fell to 5% in March.
“Take a peek below the headline jobs data, however, and there are signs that the labor market is losing some momentum,” writes Miller for Bloomberg. Noting that part-time work has “peaked” prior to the last two recessions in America, Miller notes that the decline in part-time hiring may be indicative of businesses struggling to expand and invest in more help.
Additionally, Miller notes that the Federal Reserve’s labor market index has fallen for three months in a row, which has not happened since 2009.
With part-time work down 1.8% for 2016, both Bloomberg and some analysts are warning that this is causing labor market conditions to decline, making the Federal Reserve’s index reach its lowest point since the Global Financial Crisis of 2008-2009.
“Labor conditions may be plateauing rather than deteriorating in a way that would presage a recession,” Miller writes.
For now, investors are ignoring both the weakness in the labor market and the signals of broader economic decline. The S&P 500 finished Monday and Tuesday trading sharply higher, and opens Wednesday up 2.8% year-to-date.
At the same time, bond markets are indicating cautions that growth is about to stall, as long-term Treasuries have gained over 8% for the year, leading the 10-year U.S. Treasury to yield just 1.76%, near the all-time low reached in 2012.
