Evidence That The U.S. Economy Could Be Plunging Into A Very Deep Recession Is Rapidly Mounting

Not since 2008 have we seen so much bad economic data come rolling in all at the same time.  Even without a war with Iran, which by the way is looking increasingly likely with each passing day, it definitely appears that the U.S. economy is steamrolling toward recession territory.  The employment numbers for last month were abysmal, global trade has collapsed to the lowest level that we have seen since the last recession, and manufacturing numbers just keep getting worse and worse.  In fact, the New York Fed’s Empire State manufacturing index just suffered the worst one month decline in history

The New York Fed’s Empire State business conditions index took a sharp turn for the worse in June, falling into negative territory for the first time in more than two years.

The Empire State manufacturing index plummeted 26.4 points to negative 8.6 in June, the New York Fed said Monday. That’s a record decline. Economists had expected a reading of positive 10, according to a survey by Econoday.

Not even during the last recession did we witness a plunge of that magnitude.

And other measures of U.S. manufacturing activity are also “sinking steadily”

And it’s not the only indicator showing a turn for the worse: Others, including the Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey, have also been sinking steadily.

When you step back and look at the big picture, it becomes quite clear what is happening.

At this point, it is simply not possible for anyone to credibly claim that the U.S. economy is still in good shape.  All of the numbers are pointing in the same direction, and Morgan Stanley’s chief US equity strategist Michael Wilson made this point exceedingly well on Monday

Decelerations and disappointments are mounting:

  • Cass Freight Index
  • Retailer earnings
  • Durable goods orders
  • Capital spending
  • PMIs
  • May payrolls
  • Semiconductor inventories
  • Oil demand
  • Restaurant performance indices…

and our own Morgan Stanley Business Conditions Index (MSBCI). Looking at the MSBCI in particular, the headline metric showed the biggest one-month drop in its history going back to 2002 and very close to its lowest absolute reading since December 2008.

This index has a tight relationship with ISM new orders and analyst earnings revisions breadth. Our analysis shows downside risk to ISM new orders (25% y/y), S&P earnings revisions breadth (6-13%) and the S&P 500 y/y (8%) if historical links hold.

For much more on the collapse of the MSBCI, please see my previous article entitled “Morgan Stanley’s Business Conditions Index Just Suffered The Biggest One Month Decline In History”.

Many analysts are pointing out that our economic problems really seemed to start accelerating once trade negotiations with China completely broke down, and this is true.

If the U.S. and China could find a way to reach a trade agreement, that would be a tremendous short-term boost to the economy at a time when we desperately need it.

But that isn’t going to happen unless President Trump completely caves in.  Because at this point the Chinese are extremely angry, and they are definitely in no mood to compromise.  In fact, one Chinese editorial that was recently published boldly declared that they are ready “to fight it out till the end”

“China will not be afraid of any threats or pressure the United States is making that may escalate economic and trade frictions. China has no choice, nor escape route, and will just have to fight it out till the end,” the Qiushi commentary said. “No one, no force should underestimate and belittle the steel will of the Chinese people and its strength and tenacity to fight a war.”

When Americans are deeply suffering during the next recession, will they be willing to “fight it out till the end” like the Chinese are?

And if a trade war with China wasn’t enough, now we also have a trade war with India to deal with.  In fact, India just hit U.S. exports with a wave of very large tariffs

India just increased tariffs on US exports, dealing another blow to fragile global trade.

The tariffs on several US products will go into effect on June 16, India’s Finance Ministry said in a statement Saturday. The goods targeted include American apples — which will be hit with a 70% tariff — as well as almonds, lentils and several chemical products.

Of course these tariffs were in retaliation for the tariffs that we hit India with after Trump kicked them out of a preferential trade program

The two countries exchange goods and services worth about $142 billion a year, but the relationship has soured in recent weeks after the Trump administration ended India’s participation in a preferential trade program earlier this month. The program exempted Indian goods worth more than $6 billion from US import duties in 2018.

We were certainly heading for a recession even without these trade conflicts, but without a doubt they have made things substantially worse.

And now is definitely not a good time for a recession, because much of the country is completely and utterly unprepared for any sort of an economic downturn.  The following comes from an opinion piece authored by William Spriggs

One oft-cited statistic points to just how unstable the finances of most Americans are: nearly 40 percent of households could not withstand an unexpected expenditure of $400 — the cost of just one medical bill or car repair.

The most unnerving point to keep in mind is that we are even less prepared for a sudden slowing of the economy than we were before the Great Recession of 2008.

During the relatively stable economic times of the past few years, Americans should have been preparing instead of partying.

But instead, most Americans bought into the myth that our massively bloated debt-fueled standard of living could be perpetuated indefinitely.

So now a crisis is coming which many believe is going to be even worse than what we experienced in 2008, and most of us are going to be completely blindsided by it.

About the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The End and Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.

Why Is The Media Warning A Recession Is Expected “By The End Of 2020” That Will Be “Worse Than The Great Depression”?

The mood of the mainstream media is really starting to shift dramatically.  At one time they seemed determined to convince all of us that happy days were here again for the U.S. economy, but now some mainstream news outlets are openly warning that the next recession will be “worse than the Great Depression”.  Do they really believe that this is true, or is there some other purpose behind their bold headlines?  Of course it isn’t exactly difficult to predict that another recession is coming, because the U.S. economy has experienced recession after recession ever since the Federal Reserve was first established in 1913.  But the phrase “worse than the Great Depression” implies that what we will soon be facing will be the worst economic downturn in all of U.S. history.  That is a very bold statement to make, and it should not be done lightly.

That is why I have been absolutely astounded by some of the mainstream headlines that I have been seeing lately.  For example, the following comes from a New York Post article entitled “Next crash will be ‘worse than the Great Depression’: experts”

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,” said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

And here is an excerpt from an article posted on MSN entitled “Experts warn the next recession will be ‘worse than the Great Depression’ and predict it will hit US within two years as $247 trillion global debt outdoes 2008”

The next recession could put the 2008 financial crash to shame if two experts’ predictions about the worldwide debt of $247 trillion are correct.

Expected to hit the United States within the next two years, the impact has been compared to the severe worldwide economic crisis which started 1929 and last until 1939.

It is particularly interesting that the author of the last article chose to use the phrase “within the next two years”.

That strongly implies that the U.S. economy will have plunged into the next recession before the next presidential election takes place.

Other mainstream outlets are using similar language.  For example, the following comes from a Bloomberg article entitled “Two-thirds of U.S. business economists see recession by end of 2020”

Two-thirds of business economists in the U.S. expect a recession to begin by the end of 2020, while a plurality of respondents say trade policy is the greatest risk to the expansion, according to a new survey.

About 10 percent see the next contraction starting in 2019, 56 percent say 2020 and 33 percent said 2021 or later, according to the Aug. 28-Sept. 17 poll of 51 forecasters issued by the National Association for Business Economics on Monday.

Those are stunning numbers.

If they are correct, and I have no reason to doubt them, that means that 66 percent of mainstream economists believe that the next recession will strike in either 2019 or 2020.

Of course those that follow my work on a regular basis already know that there are a multitude of signs that indicate that the U.S. economy is already slowing down.

I wanted to share another one of those signs with you today.  For years, the real estate market in Manhattan was red hot, but now we just witnessed “the fourth straight quarter of double-digit declines”

Total real estate sales in Manhattan fell 11 percent in the third quarter compared with a year ago, marking the fourth straight quarter of double-digit declines, according to new data from Douglas Elliman Real Estate and Miller Samuel Real Estate Appraisers & Consultants. It was also the first time since the financial crisis that resales of existing apartments fell for four straight quarters.

Prices fell, inventory jumped and discounts were higher and more common. Real estate brokers say the Manhattan real estate market is suffering from an oversupply of luxury units, a decline in foreign buyers and changes in the tax law that make it more expensive to own property in high-tax states.

At this point, the housing market in New York City has become “a buyer’s market”, and there are no signs that things are going to turn around any time soon…

“Offers 20 percent and 25 percent below asking prices began to flow in, a phenomenon last seen in 2009,” wrote Warburg Realty founder and CEO Frederick W. Peters in the report, which surveys real estate conditions around the city.

Warburg’s report dovetails with separate data showing a definitive cooling in New York’s housing market. The number of homes for sale in the city recently hit a record, according to StreetEasy data, amid fewer sales transactions. Meanwhile, September’s report from real estate firm MNS showed Manhattan apartment rental prices — the most expensive in the city — on the decline.

Of course this is not just happening in New York City.  Home sellers all over the nation are slashing their prices at the fastest rate that we have seen in at least eight years.

In order for people to be able to afford to buy expensive homes, they need good jobs, and more good jobs just keep getting shipped out of the country.

For example, Verizon just announced that they will be shipping thousands of information technology jobs to India

Earlier this week, Verizon confirmed that it offered a voluntary severance package (VSP) to about 44,000 employees and that it will transfer over 2,500 IT staff – some rumors suggest the figure to be closer to 5,000 employees – to India-based Infosys as part of a $700 million outsourcing deal.

The layoffs and transfers will impact more than 30% of Verizon’s 153,100-employee workforce – as of the end of June – and are part of a 4-year plan to save the largest U.S. wireless carrier $10 billion by 2021.

If you get angry when you read such stories, that is good, because they should make you angry.

The middle class in America is being systematically eviscerated, and the U.S. economy is steadily being hollowed out.

And now the mainstream media is boldly pronouncing that the next recession will arrive within the next two years, and many are suggesting that it will be even more painful than the last one…

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

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