This is what JPM said: “This morning’s employment report also raised the recession probabilities, although for counterintuitive reasons. We do not include the payrolls number in the recession model because it is subject to larger revisions than other labor market data. But the unemployment rate enters the model in two ways. As a near-term indicator, we watch for increases in the unemployment rate that occur near the beginning of recessions. So this morning’s move down in the unemployment rate lowered the recession probability in our near-term model. But we also find the level of the unemployment rate to be one of the most useful indicators ofmedium-term recession risk. So the move down in unemployment raises the model’s view of the risk of economic overheating in the medium run and raises the “background risk” of recession.”
So we have unemployment. However, a far bigger risk to the US economy is a topic we have flagged since last fall: peak, and now sliding, profits.
Because as DB’s Dominic Konstam notes something every high school econ student knows, companies cutting headcount in rising numbers, while beneficial for profits at least in the short run, has negative impacts for long-run aggregate demand, to wit…
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