This One Signal Says a Recession Is Coming Fast w/ Steven Van Metre

Summary

• Steven Van Metre identifies average weekly hours for production and non-supervisory employees as a critical recession indicator; historically, flat or declining hours during energy price spikes have signaled recessions (e.g., 1991, 2000, 2008).
• Current data shows energy prices rising while hours worked are not increasing, indicating consumers cannot absorb higher costs, mirroring past recession setups.
• Consumer weakness is evident, with McDonald's introducing cheaper menus as a red flag that consumers are at a breaking point.
• Short-term inflation will spike due to higher oil prices, but persistent inflation is unlikely without rising consumer incomes, leading to potential disinflation or deflation in pockets.
• Gold's price action is concerning as it fails to rise with increased market volatility, suggesting possible forced selling from sources like early 401k redemptions.
• The private credit space is showing signs of stress ("blowing up"), adding to economic risks alongside a weakening economy.
• The Federal Reserve faces a policy dilemma with a softening labor market and temporary inflation spikes, increasing uncertainty.
• Market reactions are sensitive to oil price fluctuations; stocks rise when oil dips slightly, reflecting fear of prolonged high oil prices.
• Overall, the economy is weakening with significant recession risks driven by consumer affordability issues and labor market softness.