3 signals that show a US recession is farther away than most investors think
But according to a Tuesday note from DataTrek Research co-founder Nicholas Colas, there are actually three encouraging signs that suggest a recession is not as close as some investors think.Atlanta Fed GDPNow model
estimate suggests first-quarter GDP growth will be 2.2%. The model has a history of being more accurate than consensus estimates, and while its forecast has dropped from a high of more than 3% just a couple weeks ago, 2% growth is still solid when investors consider all of the lingering concerns in the economy.2. March jobs report showed a continued decline in wage inflation
Wage growth in March was 4.2%, which, while still elevated, is well below last year's March reading of 5.9%. The trend of lower wage inflation is clear and it's not far off from returning to its 2010 to 2018 range of just under 3%. A continued drop in wage inflation would give the Fed reason to pause its interest rate hikes.
"While Fed Chair Powell and the FOMC can take some comfort that wage inflation is dropping, it is only doing so at a very leisurely pace. Us economic growth remains ok, so wage growth still has some fundamental support," Colas said.Demand for gasoline in the US turned positive in March, jumping 3.8% year-over-year. The rebound in gasoline demand has been buoyed by a near 20% decline in gasoline prices.
"US corporate bond spreads are not at levels consistent with recession fears, let alone sounding a clear alarm about an imminent economic slowdown... the corporate bond market has a decent long term track record of catching a recessionary 'cold' long before stocks even get the sniffles. In fact, it is a bit of a hypochondriac. To hear this market say 'Yeah, I feel ok' is therefore a reassuring message," Colas concluded.
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