In this report we analyze the current state of the US economy and the likelihood of being in a recession. We are looking at the 13 best indicators for real-time clues for our proprietary recession indicator. This indicator has not given any wrong positive or false negative since 1971.
Detailed charts on employment, consumption, orders and sentiment create a holistic picture of the state of the US economy.

Summary

The “Good”:

• Continued growth in non-farm payrolls with noticeable upwards revision of earlier months
• Best year-over-year increase in men’s labor force participation since July 2008
• Consumer Confidence (3m average) highest since February 2005
• Accelerating demand for business (+13%) and consumer (+5%) loans
• Better growth in average weekly earnings

The “Bad”:

• Real retail sales per capita have still not reached the level seen in March 2006
• Retail sales growth excluding (easy-to-finance) autos has slowed to 1.7%
• Lower growth in core durable goods orders
• Weaker growth of employment, income and consumption than during earlier recoveries

CONCLUSION: The US economy is very unlikely to be in a recession. However, economic growth remains timid. Combined with low inflation, nominal GDP growth seems insufficient to service considerable debt levels in the long term. The current economic expansion (70+ months) already exceeds the average (65 months) and median (59 months) length of economic recoveries since 1958. What would the Fed do if the economy re-entered a recession? Its balance sheet already exceeds $4 trillion, or 25% of GDP. A strong dollar and slowing inflation might force the Fed to launch another episode of quantitative easing.