by Justin Hart
The global economy is unraveling right before our eyes, and it’s time we acknowledged the truth: we are in a recession. No, not just a downturn, not just a slowdown—this is a full-blown recession, and the data bears it out. From credit card shutdowns and weakening consumer confidence to deteriorating labor markets across the world, every indicator points towards a looming and potentially prolonged economic crisis. What we’re seeing now isn’t just the usual cyclical dips; it’s the sign of something far more sinister.
This post brings together recent data, expert commentary, and financial signals that are blaring loudly for anyone who cares to listen. It’s time we face the uncomfortable truth—no amount of wishful thinking or temporary payroll “surges” can hide the broader picture. Below, you’ll find a comprehensive look at the data points that are screaming recession, highlighting what’s unfolding globally:
Recession Signals & Trends:
- China’s Banking Crisis and Credit Conditions:
- China is currently undertaking a major recapitalization effort for its six largest banks, injecting up to 1 trillion yuan (approximately $137 billion) to stabilize its banking sector. This follows an alarming increase in non-performing loans, reported to be 1.3 trillion yuan as of June 2024, up 4% since December 2023. This massive bailout effort, the first since the global financial crisis, underscores the depth of the banking system’s troubles, especially as banks continue to pull back on credit due to hidden losses and balance sheet constraints.
- Decline in Credit Card Usage:
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- The Federal Reserve reported a seasonally adjusted aggregate balance decline in revolving credit for the second time in three months. Credit card usage has fallen significantly since March, indicating that consumers are pulling back in fear of economic uncertainty. Historically, such behavior closely correlates with rising unemployment rates and a worsening labor market. Consumers aren’t just saying they’re worried; they’re acting on it by paying down balances and refraining from additional debt—clear recession behavior.
- Labor Market Deterioration:
- The September payroll report may have grabbed headlines with positive numbers, but the reality underneath paints a much bleaker picture. The average workweek fell to 34.2 hours—a clear recession signal that suggests employers are cutting back on hours even if they aren’t yet laying off workers en masse. Hours worked have been flat over the past six months, mirroring similar trends seen in the 2001 and 2008 recessions.
- Hiring plans have also plummeted. According to Challenger, Gray & Christmas, employers in the U.S. announced just 483,000 hiring plans for 2024—the lowest year-to-date hiring since 2011. The labor market’s resilience is largely an illusion, driven by seasonal adjustments and government hiring, not by real economic strength.
- September’s payroll report delivered what seemed like great news, with 254,000 jobs added. However, adjusted data shows 223,000 new private jobs and 32,000 new government jobs, heavily skewed by seasonal adjustments. Unadjusted numbers reveal 918,000 new government jobs but a decline of 458,000 private jobs. The household survey indicates that 86% of new jobs in September were government jobs, highlighting the fragility and imbalance of this job growth. The quality of new jobs is uneven, with higher-paying sectors like manufacturing and tech seeing job losses, characteristic of a recessionary environment.
- Consumer Confidence in Decline:
- Consumer credit balances declining isn’t just about spending less—it’s a reflection of confidence, or rather, the lack thereof. The Conference Board recently reported that consumer assessments of current business and labor market conditions turned negative in September. People are pessimistic about future conditions, which is leading them to pull back from spending and taking on new credit.
- Global Weakness Mirroring U.S. Trends:
- The economic weakness isn’t confined to the United States. Japan’s key leading economic indicator recently dropped to its lowest level since October 2020. Japan is once again sliding into recession, impacted by global economic frailty, including a significant drop in exports to the U.S. The Bank of Japan has now shelved any plans for further rate hikes, recognizing that economic deterioration is not just likely—it’s already happening.
- Similar trends are seen in Mexico, where the manufacturing PMI fell to a 32-month low, reflecting a sharp downturn in demand. Mexican officials even blame the slowdown on U.S. election uncertainty—a diplomatic way of pointing fingers at deeper economic frailties in their northern neighbor.
- The Payroll Mirage:
- September’s payroll report delivered what seemed like great news, with 254,000 jobs added and a drop in unemployment. But look closer: the gains were heavily concentrated in sectors like leisure, hospitality, and government, while higher-paying sectors like manufacturing and tech actually saw job losses. This kind of lopsided growth is typical of a recessionary environment where the quality of new jobs doesn’t match up to previous employment levels.
