Wall Street's Favorite Permabear Believes the U.S. Recession Has Already Started, Based on These Two Leading Indicators

Albert Edwards, the well-known global strategist at Société Générale renowned for his consistently bearish views on the economy and markets, has issued a cautionary note to Société Générale clients. In this latest communication, Edwards emphasizes the significance of two key employment indicators that have historically foreshadowed economic downturns, challenging the prevailing optimism surrounding a potential "soft landing" for the U.S. economy in 2024.

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A primary indicator highlighted by Edwards is the substantial decline in employment within the logistics sector, particularly in roles such as trucking. He contends that the logistics industry serves as a reliable cyclical indicator, akin to a canary in a coal mine.

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Edwards notes that historical data has demonstrated that decreases in trucking jobs typically precede economic recessions. The sharp drop in employment in these sectors throughout the current year, attributed to persistent pandemic-related disruptions in demand for goods, raises concerns for Edwards.

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Furthermore, Edwards draws attention to another critical employment subset, namely the temporary-help segment within the services industry. He points out that this subset has experienced a pronounced downturn in the current year, mirroring patterns observed prior to recessions in 2001 and 2007. Edwards underscores the historical precedence of the temporary-help series declining approximately 12 months ahead of previous recessions. Notably, he highlights that this series has been steadily sliding since October 2022, and projecting forward 12 months places us in the present, suggesting a potential cause for worry.

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Despite signs of a slowing U.S. labor market emerging from the post-pandemic period, such as a rise in the unemployment rate to 3.9% in October (the highest level since early 2022), Edwards contends that these employment indicators merit close attention. While data for October revealed the addition of 150,000 new jobs, indicating a response to the Federal Reserve's assertive interest-rate hikes initiated since March 2022, Edwards remains skeptical about the broader economic trajectory.

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In essence, Edwards challenges the narrative of a smooth and controlled economic descent, commonly referred to as a "soft landing." By highlighting these employment indicators, he aims to cast doubt on the prevailing optimism and to caution against complacency. Edwards' skepticism stems from the historical correlation between these indicators and past recessions, suggesting that the anticipated soft landing might not be as assured as some believe.

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As the U.S. labor market undergoes shifts and the impact of monetary policies unfolds, investors and analysts alike find themselves at a crossroads, contemplating the potential trajectory of the economy in the coming months. Edwards, with his history of accurate economic foresight, seeks to inject a dose of caution into the prevailing narrative, urging stakeholders to remain vigilant amid evolving economic conditions.

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