(Bloomberg) -- When everyone expects a soft landing, brace for impact. That’s the lesson of recent economic history — and it’s an uncomfortable one for the US right now.Most Read from BloombergOnce Unthinkable Bond Yields Now the New Normal For MarketsCongress Averts US Government Shutdown Hours Before DeadlineMcCarthy to Face Far-Right Attempt to Oust Him as House SpeakerSenate Voting on Bill to Avert US Government ShutdownEurope’s Richest Royal Family Builds $300 Billion Finance EmpireA summer
A summer in which inflation trended lower, jobs remained plentiful and consumers kept spending has bolstered confidence — not least at the Federal Reserve — that the world’s biggest economy will avoid recession.
The bottom line: history, and data, suggest the consensus has gotten a little too complacent — just as it did before every US downturn of the past four decades. “Monetary policy,” Milton Friedman famously said, “operates with long and variable lags.” One subtlety here is that the “variable” can refer not just to differences between one recession and another — but also to different parts of the economy within a single cycle.
And the Fed may not even be done hiking yet. In their latest projections, central bankers penciled in one more rate increase.Against the backdrop of that monetary squeeze, it’s little wonder that some indicators are already flashing warning signs. Bloomberg Economics took a closer look at measures that are especially important for the eminent academics who’ll officially declare whether the US is in recession or not.
Auto Strike: The United Auto Workers union has called a walkout at America’s Big Three auto firms, the first time they’ve all been targeted at the same time. It expanded the strike on Friday to encompass some 25,000 workers. The industry’s long supply chains means stoppages can have an outsize impact. In 1998, a 54-day strike of 9,200 workers at GM triggered a 150,000 drop in employment.
Global Slump: The rest of the world could drag the US down. The second-biggest economy, China, is mired in a real-estate crisis. In the euro area, lending is contracting at a faster pace than in the nadir of the sovereign debt crisis — a sign that already-stagnant growth is set to move lower. Revealing about the shape of things to come: Credit-card delinquency rates have surged, notably among younger Americans, and parts of the auto-loan market are turning bad too.One indicator that does have a good track record of anticipating downturns is the Fed’s survey of senior loan officers at banks, known as the SLOOS.
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