U.S. Recession To Be Revealed By January 2025 “Data Bomb” | Danielle DiMartino Booth
Monetary Matters with Jack Farley
Deep Dive
Why does Danielle DiMartino Booth believe the U.S. economy is already in a recession?
Danielle DiMartino Booth believes the U.S. economy is already in a recession because of downward revisions to payrolls, increasing bankruptcies, and the persistence of negative data on job losses, despite official unemployment rates suggesting otherwise. The revisions to personal income data and the slowdown in private fixed investment are also strong indicators of a recession.
Why is January 29, 2025, a significant date for the U.S. economy?
January 29, 2025, is significant because the Bureau of Labor Statistics will release its estimates of the death portion of the birth-death model, which will likely show a further downward revision to job numbers. This data, combined with the Federal Reserve's next statement, could reveal the true weakness of the job market and indicate a recession.
Why does Danielle think the unemployment rate will continue to rise in 2025?
Danielle believes the unemployment rate will continue to rise in 2025 because the economy has filled up the pool of part-time workers, leaving less room to absorb people who lose their jobs. Additionally, there are significant layoffs and bankruptcies in the pipeline, which are likely to affect the job market further.
Why does Danielle think the stock market's rise is not based on economic reality?
Danielle believes the stock market's rise is not based on economic reality because it is driven by passive investing and a few large tech names, rather than broad economic fundamentals. She sees it as a bubble and notes that the market has more decliners than advancers, indicating underlying weaknesses.
How does Danielle view the impact of demographics on the stock market?
Danielle views the impact of demographics on the stock market as significant. With 40% of the stock market owned by individuals over 70, who are not planning to re-enter the workforce, any reduction in interest income could lead to liquidation of stock portfolios. This demographic shift could test the Fed put and affect market dynamics.
Why does Danielle think commercial real estate is facing a crisis in 2025?
Danielle thinks commercial real estate is facing a crisis in 2025 because of the end of the 'extend and pretend' practices by banks and regulators. Moody's has reported double defaults and a significant increase in delinquencies, and buildings are trading at large discounts, indicating severe financial stress in the sector.
What is Danielle's outlook for the 10-year Treasury yield in 2025?
Danielle sees downside for the 10-year Treasury yield, but not necessarily to 3%. She expects it to potentially reach 3.5% and anticipates that the yield curve will continue to steepen, with the short end going down more than the long end. She also expects volatility to remain high in 2025.
Why does Danielle think the labor market data might be misleading?
Danielle thinks the labor market data might be misleading because it is heavily modeled and based on backward-looking data. The birth-death model, which gauges job creation and loss, is set to roll forward, potentially showing more accurate and negative revisions. The gig economy has also absorbed many would-be jobless claimants, skewing the data.
What does Danielle think about the Federal Reserve's interest rate cuts projected for 2025?
Danielle believes the Federal Reserve might have to revisit its dot plot and cut interest rates more than currently projected. She expects more cuts due to the expected rise in jobless claims and the economic impact of announced bankruptcies and layoffs, especially in January 2025.
- Debate on whether the U.S. is in a recession.
- Examination of unemployment rates and job creation data.
- Impact of gig economy and unemployment benefit exhaustion.
Shownotes Transcript