The US economy now triggers two recession warning signals according to new data from the U.S. Bureau of Labor Statistics.
“A cooling labor market is raising concerns that the U.S. economy might be heading toward a recession after all this year, instead of making the soft landing projected by most experts,” reported NewsWeek on Wednesday.
Housing expert and journalist Lance Lambert shared data on X from the U.S. Bureau of Labor Statistics on Tuesday showing that the country’s labor force growth has slowed down and unemployment has risen over the past 12 months.
These are two trends that are usually observed before a recession, he wrote on X.
“We’re seeing both,” Lambert said.
“The pandemic/post-pandemic economy is unique in many ways,” he added in another post.
“But if economists are going to tell us to disregard many traditional recession indicators, then it’s fair to ask them what economic data would they need to see roll over in order to be concerned?”
Recent data shows a concerning trend in the U.S. labor market.
While the overall size of the labor force has grown by a significant 1.3 million people over the past year, the number of unemployed workers has also increased by a similar amount, at 1.26 million.
This trend is reflected in the latest figures from the U.S. Bureau of Labor Statistics, which show the unemployment rate rising to 4.3% in July, the highest level since October 2021.
Adding to the concern, the U.S. economy only created 114,000 jobs in July, the second-lowest monthly gain in over four years.
“A slower gain was only reported in April 2024, when only 108,000 jobs were created.
On top of that, the United States Department of Labor dramatically revised June’s job growth figure to 179,000 from the 205,000 job gain initially reported,” reports NewsWeek.
The US stock market experienced a sharp decline early this month, fueled by worries about a potential economic downturn.
The Nasdaq index plummeted by over 2.4% on August 2nd, while the Dow Jones Industrial Average and the S&P 500 also suffered losses of 1.5% and 1.8%, respectively.
Although the market has since recovered some ground, Wall Street remains cautious, with concerns about a possible recession lingering.
The sudden drop in stock prices highlights the fragility of the market and the sensitivity to economic uncertainties.
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Also Read: Massive Banks Are Now Accused of Cheating Customers Billions
Other Economy News Today
Exposures at hedge funds now surge to over $28 trillion, leaving banks with massive risk according to the latest report.
According to a report from the U.S. Treasury’s Office of Financial Research (OFR), the Gross Notional Exposure at hedge funds has seen a significant increase over the past year.
Specifically, the data shows that this metric has surged by 24.5% — going from $22.946 trillion on March 31, 2023 to $28.579 trillion on March 31, 2024.
This dramatic growth in hedge fund exposures is notable, as it occurred despite the banking crisis that took place in the spring of 2023.
During that time, several major banks, including the second, third, and fourth largest institutions, experienced failures or severe distress.
The report provides a visual chart that allows users to observe this stunning increase in hedge fund exposures by simply running their cursor along the top green line on the graph.
This graphical representation helps illustrate the scale and rapidity of the growth in these risk exposures, even in the midst of the broader turmoil in the banking sector.
The OFR was created under the Dodd-Frank financial reform legislation of 2010 to keep bank and market regulators informed of growing risks, in the hope of preventing another financial crisis like that of 2007-2010 from occurring.
“Unfortunately, Wall Street’s lobbying, bullying and regulatory capture has exponentially outstripped the clout of the OFR,” reports Wall Street on Parade.
“As a result, all that the public can do is read about the potentially catastrophic risks inherent on Wall Street today at the OFR’s website and wonder when the next blowup and Fed bailout will occur.”
According to a report from the Bank for International Settlements (BIS) released on March 4th, the Prime Broker operations of three major U.S. financial institutions – Goldman Sachs (GS), Morgan Stanley (MS), and JPMorgan Chase (JPM) – were each servicing more than 1,000 hedge funds as of 2022. This data is presented in a chart within the BIS report.
What makes this situation particularly concerning is that all three of these megabanks have a well-documented history of mismanaging risks in their relationships and dealings with hedge funds.
In other words, these same banks that own federally-insured deposit-taking institutions are also deeply embedded in providing prime brokerage services to a vast number of hedge funds, despite their prior track record of poor risk management in this area.
The combination of these systemically important banks having such extensive prime brokerage exposure to over 1,000 hedge funds each, coupled with their notorious history of mishandling these types of relationships, raises significant questions about the potential systemic risks and vulnerabilities present in the financial system.
This data point from the BIS report paints a picture of a highly interconnected web of relationships between the largest U.S. banks and the hedge fund industry, which could amplify the transmission of shocks and instability throughout the financial system if not properly monitored and controlled.
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Also Read: The US Treasury Direct is Now Freezing Customer Accounts
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