It’s still too early to dismiss the threat of a new recession, but if there’s macro trouble ahead it’s not obvious in the big picture for August. Macroeconomic Advisers released its latest monthly estimate of U.S. GDP to the public yesterday and reports that the economy expanded 0.4% in August. That’s down from July’s 0.9% pace, and so the question is whether September’s numbers will reflect a further slowing in the broad trend? Answering that question still requires guesswork since all of September’s numbers haven’t been released yet. (The official government GDP report is calculated quarterly and the first Q3 estimate is scheduled for release on Oct. 27.)
What we do know, based on the data so far, is that the economy grew in August, pushing Macroeconomic’s estimate of GDP to the highest level since the Great Recession ended in June 2009.
As for the September indicators that are known, the numbers look moderately encouraging to date. For example, industrial production last month rose a modest 0.2%, up from no change in August. That’s a weak performance, but at least it’s a move in the right direction for thinking that September won’t succumb to the forces of contraction. Looking at the year-over-year change in industrial production through September is more encouraging with annual growth of 3.2%, or well above levels that typically relate with recessions.
Job creation was still rolling along last month, too, with a net gain of 137,000 in private nonfarm payrolls in September–up sharply from August’s meager 42,000 rise. September’s rebound is still mild by historical standards, but it doesn’t look like a smoking gun for arguing that we’re in a recession. The recent trend in weekly jobless claims doesn’t look ominous either, at least not for predicting a new recession is here.
The September update on retail sales also implies that the economy continued expanding last month. Consumer spending rose 1.1% in September, the most since February. On an annual basis, retail sales are higher by nearly 8% through September. Historically speaking, that’s a strong pace and it’s no trivial figure for an economy that relies heavily on consumer spending.
From the sentiment corner, optimists can point to the fact that the stock market is no longer in the red on a 12-month basis (as it was briefly for a few days in late September/early October). Equities are hardly a flawless predictor of the macro trend, but it’s worth reminding that every recession in the past 50 years has been accompanied by a persistent 12-month price loss in the S&P 500. By that standard, the market hasn’t yet thrown in the towel on the economic outlook.
None of this is a guarantee that another recession isn’t near. There are plenty of risks weighing on the global economy and the U.S. expansion is sufficiently precarious to wonder if the trend can survive another unexpected shock. But the mounting statistical evidence in the September reports suggests that last month wasn’t the start of a new downturn. Maybe October’s numbers (when they’re released in November) will bring different news, but for the moment there’s still a case for arguing that the weak recovery stumbles on.