U.S. recession will be ‘backdated’ after November, economist warns

The U.S. economy added far fewer jobs than previously reported over the past year, leading one analyst to predict that the country has already entered into a recession.

Dallas-based economic analyst Amy Nixon said, “After November, the recession will be backdated,” referring to expected downward revisions to GDP growth in the coming months.

Nixon’s grim warning came after government economists downwardly revised the country’s employment growth between March 2023 and March 2024. According to the Bureau of Labor Statistics (BLS), employers likely added 818,000 fewer jobs than initially reported over that period.

Creditnews has repeatedly warned about stealthy revisions to employment figures, but the latest BLS report is a shocking admission of how unreliable government data has become.

In Nixon’s view, a deteriorating job market is another sign that “stagflation” has taken root.

Although Federal Reserve Chairman Jerome Powell famously quipped that he sees no evidence of “stag” or “flation,” Nixon begs to differ.

The “stag” in stagflation includes “layoffs [...] weak housing starts, weak purchase apps, low transaction volume,” Nixon said. The “flation” is primarily reflected in elevated shelter costs since mid-2022.

Although the debate about a recession is far from conclusive, the latest economic indicators suggest things are unraveling more quickly than previously expected.

A sign of things to come?

One of the most closely watched recession indicators flashed red earlier this month after the national unemployment rate jumped to a nearly three-year high. According to the Sahm Rule, a recession is likely on the horizon when the unemployment rate’s three-month moving average rises by at least 0.5% from its 12-month low.

As Creditnews reported, the Sahm Rule was triggered during all eight major recessions dating back to 1970.

Market strategist Jack Schannep, who founded TheDowTheory.com, warned of a recession months before the Sahm Rule flashed red.

In June, he told MarketWatch that a “recession is underway” based on the Schannep Recession Indicator, which also compares changes in unemployment trends.

Although the Federal Reserve remains tight-lipped about the possibility of a recession, Chicago Fed Bank President Austan Goolsbee recently said that “some leading indicators of recession are flashing [a] warning.”

Other indicators of recessionary forces are also building. According to former Dallas Fed adviser Danielle DiMartino Booth, a lack of housing demand and rising Chapter 11 bankruptcy filings are cause for alarm.

Booth said the U.S. economy is already in a “plain vanilla recession” that started in October 2023. Much like Nixon, Booth expects downward revisions in government data to confirm that a recession is already underway.

Some of those revisions have already been made. The Bureau of Economic Analysis recently cut its estimate of first-quarter growth from 1.6% to 1.3%, citing “a downward revision in consumer spending.”