‘We are in a recession already,’ financial veteran says

DoubleLine Capital CEO Jeffrey Gundlach believes the Federal Reserve has unknowingly dragged the U.S. economy into a recession by delaying rate cuts until September.

In a recent panel discussion, the billionaire “bond king” said the Fed should have cut interest rates much sooner.

Now, with job growth slowing and layoffs rising, the economic downturn policymakers said they’d avoid has already started. “We are in a recession already,” Gundlach said, as reported by Bloomberg.

“I see an awful lot of layoff announcements.” The national unemployment rate has peaked at 4.3% in July, the highest since October 2021.

Citing a recent Challenger, Gray, & Christmas report, Business Insider reported that layoff announcements surged by 193% between July and August. Hiring plans also fell to the lowest level on record.

Gundlach has more reasons to be pessimistic about the labor market.

In August, the Bureau of Labor Statistics infamously lowered its estimate for job growth by a whopping 818,000 positions between March 2023 and March 2024.

This means the Fed continued to raise interest rates in 2023 under the faulty assumption that hiring was much stronger than it actually was.

For these reasons, some economists believe the U.S. recession will be “backdated” as government statisticians revise their previous growth estimates.

How’s the economy? Ask the consumer

Although the U.S. economy likely grew again in the third quarter, the behavior of American consumers is hinting at a weakening economy.

In September, the Conference Board’s consumer confidence index posted its biggest one-month drop since August 2021 as more Americans expressed fear about the job market.

According to the survey, Americans are increasingly pessimistic about the state of the economy and future hiring trends. About half of the respondents said jobs were “not plentiful,” with roughly one in five saying employment was “hard to get.”

As economist David Rosenberg noted, this usually signals the start of a much larger layoff cycle.

In another sign of stress, more Americans are falling behind on their credit card and auto payments.

According to New York Fed data, the average likelihood that consumers would miss their minimum credit card payment over the next three months has shot up to 13.6%, the highest since April 2020.

By comparison, this figure was less than 10% in February 2020.

A separate CNN study showed that nearly four in ten Americans worry about not being able to pay their bills on time. This figure is higher than the peak during the global financial crisis.

That's on top of record debt as more households rely on credit cards to make ends meet. By the end of the second quarter, Americans collectively owed $1.14 trillion in credit card bills, the highest on record.

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