RBC Capital Market’s Chief Economist, Jonathan Golub, sat down with Business Insider CEO Henry Blodget on this week’s episode of The Bottom Line. Golub says all signs point to no recession. Following is a transcript of the video.
Blodget: People talk about the market climbing a wall of worry. I am a worrier-in-chief, I have tons of worries that I focus on. You say, “Henry there is nothing to worry about.”
Golub: Listen, there’s always something to worry about. But I think people are working way too hard to come up with an argument when we have, you know, the Fed told us that the chance of a recession in the next year is 6%. In the ninth year of a recovery, that’s, you know, that’s crazy. That means that the economy is on very solid footing . Earnings in the ninth year of a recovery are now re-accelerating and stronger, and not only in the US — we’re seeing this everywhere. So, the backdrop is really fantastic.
Blodget: Lets talk about a recession. What I have learned in 20 years of being an analyst and watching Wall Street and so forth is that recessions are screamingly obvious in hindsight but when you are looking forward they’re extremely difficult to predict. So, the measure you just cited about the Fed saying, “Hey, there’s only a 6% chance of recession,” is that actually predictive? Are you comfortable?
Golub: If i was using it by itself it would be helpful but not enough. Here are the things that we know: When you have — before going into a recession, job growth actually declines. So, companies lay off more workers than they add. We’re adding something like 175,000 or 200,000 jobs a month, so about over 2 million new jobs a year. That’s not remotely close to what would happen if you were to have a recession. Housing activity, not robust, but there’s more people buying housing than not. You would see that go in reverse. So housing starts would fall off, we’re not seeing that. Manufacturing data is expanding around the world, that doesn’t happen. So, if you look at when RBC puts out a scorecard of seven of these items and if even one or two of them say you’re not going to have a recession, you don’t typically get one and six of the seven are saying perfect green light one of them is a yellow it really looks very, very positive.
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