October 11, 2023
By Harris L. Kempner, Jr., President

Same song, 4th verse……. Despite continuing, strong employment numbers and other signs of strength, we still believe there will be a recession in the United States, but now think it will begin in the first quarter of next year, rather than in 2023. Again, the economy always appears strong for the three quarters before the downturn takes place.

The yield curve inversion that has been discussed before began 10 months ago in late 2022, but in 2008 and in all other years, such an inversion took longer to take effect on the overall economy – as much as 18 months. We expect that pattern will be repeated. Moreover, inflation is coming down even more rapidly than earlier this year. Average hourly earnings, despite the strong employment, is only +.2% for each of the last three months, down from much higher previously. Used cars, as an example of consumer goods, is down 3.9% year-over-year. Interestingly, despite all headlines, the FAO global food measurement is down 10.79% since the first of the year. There is commodity weakness also in copper, wheat, lithium, etc. There is corporate price cutting from Disney, Tesla, FedEx, and others.

And of course, there is the fight going on with the Israeli and Gaza/Hamas and Hezbollah in the north. Leaving aside the horrible loss of human life on all sides, this is unlikely to be positive for the economy going forward because it massively increases world-wide uncertainty. The specter of the possible involvement of Israel and Iran directly, will hang over almost all world economic decisions as people try to understand what the larger ramifications of this battle will be. It is with enormous regret that I write this, but it needs to be understood and dealt with to the greatest extent of our abilities.