John Hussman continues to press the case for imminent recession, based on his own brew of factors that he looks at.
In his post, he takes aim at critics who have taken aim at him and the ECRI (which is also calling for recession), and though he doesn’t name them by name, there’s a good chance he’s referring to Jeff Miller at A Dash Of Insight, who has been writing a lot about recession forecasters.
So going back to Hussman, he presents a very simple brew of data, which he argues screams slowdown.
Recession evidence is best measured by capturing a syndrome of conditions that reflects broad deterioration in both real activity and financial indicators. What’s perplexing to me is that the recession concerns we’re seeing are evident even in composites of very widely tracked economically-sensitive indicators. For example, the chart below is simply the average of standardized values (mean zero, unit variance) of the following variables: 6 month change in S&P 500, 6 month change in nonfarm payrolls, 12 month change in nonfarm payrolls, 6 month change in average weekly hours worked, ISM Purchasing Managers Index, ISM New Orders Index, OECD Leading Indicator – total world, OECD Leading Indicator – US, ECRI Weekly Leading Index growth, Chicago Fed National Activity Index – 3 month average, credit spreads (Baa vs 10-year Treasury), Industrial commodity prices – 12 month and 6 month change, and New building permits 6 month change.
The current average is at levels that have always and only been associated with recession (and at about the same level where most recessions have started), though there was a brief dip nearly approaching these levels in 2002, just after the 2000-2001 recession.