🍎 🍕 Less apples, more pizza 🤔 Have you seen Buffett’s portfolio recently?Explore for Free

Deterioration in labor market indicates recession is imminent, says BCA Research

Published 09/03/2024, 04:53 AM
Updated 09/03/2024, 04:55 AM
© Reuters.  Deterioration in labor market indicates recession is imminent, says BCA Research
SPY
-

The ongoing deterioration in the U.S. labor market is a signal that a recession is imminent, BCA Research said Monday. This view places the firm in the minority, with the investor consensus anticipating a soft landing.

According to BCA Research’s latest strategy report, the labor market has frayed significantly over the past few months, pushing the firm to adopt a defensive stance four weeks ago.

“There has never been a case in the post-war era where the three-month moving average of the unemployment rate has risen by more than one-third of a percentage point without a recession taking place,” BCA pointed out.

The report highlights several concerning trends in the labor market. Small business hiring intentions have declined, temporary employment remains weak, and initial unemployment claims are on the rise.

These signs, combined with persistent softening in key metrics from the JOLTS survey, were sufficient for BCA to turn defensive on equities as of early August.

“We turned tactically defensive four weeks ago, as the labor market frayed enough to portend a recession. Investors should be using the post-August-5th bounce to reduce risk asset exposures,” the note states.

“The risk/reward of defensive positioning looks more appealing than aggressive positioning against a backdrop of weakening fundamentals and ambitious expectations.”

BCA also points out that consumer behavior is unlikely to sustain the economy as it did during the pandemic.

While households still have some capacity to spend, largely due to savings built up during the pandemic, BCA notes that "neither their resources nor their spirit is inexhaustible."

Moreover, with banks tightening lending standards for eight consecutive quarters and consumer delinquencies on the rise, the outlook for future income is bleak.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.