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The Dog that Didn't Bark

ECRI’s Lakshman Achuthan joined CNBC to discuss the latest jobs data, and slowing U.S. economic growth. Key points covered include:

Building on our earlier slowdown call, the incoming data has made analysts begin to acknowledge that the economy is not as strong as they had expected – that’s the critical backdrop for the market jitters.

Could a full-blown trade war be recessionary?

It all depends on where we are in the business cycle at the time a negative shock, such as a trade war, hits.

Up front, this is a weaker month-on-month jobs report.

But in the spirit of Sherlock Holmes, we observe that the dog that still won’t bark is the unemployment rate, which has been stubbornly flat following its post-hurricane drop –stuck at 4.1% for six straight months.

Economists are still generally too optimistic on growth, which is normal around cyclical turning points. They also understand the arithmetic of the jobless rate, specifically that the jobs growth needed to lower the jobless rate is really low, which is why every month they keep predicting that it will fall.
But what they’re missing is the cyclical part. In contrast, based on our research that flagged the slowdown last fall, we expected the jobless rate to flatten out.

In the context of our slowdown call last fall, when ECRI was pretty much alone, the incoming data has made the market begin to acknowledge that the economy is not as strong as expected – that’s the critical backdrop for the market jitters.

This is typical around cyclical slowdowns in growth, regardless of the ostensible cause of the market correction.

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