The Recession Is Playing Out Just as We Predicted

Amanda Heckman|July 30, 2022

Andy missed his calling as a fortuneteller.

Nearly every big prediction he’s made this year has come to pass.

This week proved him right on multiple calls as scores of companies released earnings… the Fed raised rates again to try to tamp down inflation… and, the news Andy has expected all along…

The indisputable proof that the U.S. is in a recession came out.

For six months, we’ve warned that peak employment… a drop in consumer savings… and an inflationary hangover from printing trillions of dollars would put the economy in retreat.

Now here we are… right on all counts.

What Recession?

The Commerce Department told us that the U.S. economy (as measured by GDP) shrank for a second straight quarter, contracting at an annual pace of 0.9%.

As you know, two straight quarters of decline is the “textbook” definition of a recession.

Every period in the past with two consecutive quarters of negative growth has been deemed a recession.

So… we’re in a recession.

Right?

Nope! At least, not if you ask the folks in charge of this mess.

Proving another one of Andy’s predictions right… our so-called leaders are doing everything they can to deny that we’re in a recession – instead of, you know, actually fixing what ails us.

And, boy, are they the kings of denial.

Ahead of the release of the latest GDP numbers, they started squirming. They began telling us that two quarters of decline was not the “technical” definition of a recession.

Robert Hall, from the National Bureau of Economic Research – the official tracker of recessions – said in an interview, “I don’t think that the two-quarter idea has any merit.”

Yet that’s exactly how the government had defined it as recently as May.

Everyone from the chair of the Council of Economic Advisers to the director of the National Economic Council has been on record saying as much.

Oops.

For weeks now, countless officials – and Washington-friendly economists and CEOs – have tried to convince Americans that we can’t be in a recession because our economy is strong. On Thursday, President Biden pointed to a record jobs market and record unemployment and said, “That doesn’t sound like a recession to me.”

And that leads us to Andy’s third bull’s-eye.

The jobs market.

An Ugly Picture

Andy warned us employment would be the next piece of the economy to break. He explained how Washington is painting a rosier picture than reality warrants…

Washington tends to rely on two main sources of jobs data – a payroll survey and a household survey. The payroll survey counts the number of jobs. The household survey counts the number of people with jobs.

In other words, if we have two jobs, the payroll survey counts us twice… but the household survey counts us just once.

Guess which one the folks in Washington are using.

But now the picture is changing… and getting uglier by the minute.

Jobless claims have hit an eight-month high. We’ve seen three straight weeks of increasing claims.

And past recessions have shown us that it’s going to get far, far worse.

Cut It Out

The mess we’re in brings us to one final prediction from Andy.

It’s looking more and more certain…

That we’ll be seeing rate cuts by year’s end.

Fed Chair Jay Powell opened the door to the possibility in his remarks on Wednesday.

He referred to a “softening economy.” He said rate hikes could slow. And, most tellingly, he said his committee will no longer provide forward guidance for the rest of the year. Instead, the Fed will make decisions on a meeting-by-meeting basis.

Now they’ll react solely based on the latest economic data. And given how quickly rates were cut when the economy started slowing in 2019…

It won’t be long before Andy’s proven right… again.

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