HEATHER LONG: Do the math. Recession risks add up.
When I saw the stock market rout in recent days, I was relieved. The big dip did two things that were much needed: First, it took some craziness out of the market. The "magnificent seven" tech stocks needed a reality check on their valuations, and they got it. Second, the big dip pretty much guarantees the
Is
What's really going on is the economy is slowing down to a walk after years of sprinting. It's hard to judge slowdown situations. Everyone is trying to figure out whether the economy is moderating to a normal walking pace, an Olympic speed-walking gait or something that looks a lot like a hobble. People can feel the deceleration. There aren't as many "we're hiring" signs around, and discounts are back everywhere from McDonald's to
This is a different economy from the one we had a year ago. In 2023, consumption (adjusted for inflation) was averaging 2.75% growth. So far this year, that's cooled to a 1.9% pace. That's just below the historical norm, but it feels weak after the post-pandemic boom. It's a similar story in the labor market. Unemployment is up (4.3% now versus 3.5% a year ago), and it's taking longer for people laid off to find jobs. While unemployment remains low by historical standards, it's noticeable that 1 million more people are out of work now than a year ago. Another factor to watch is the "diffusion index" that looks at what percentage of 250 industries are hiring. Last summer that index was hovering around 60%, indicating broad-based job growth. This July, it fell below 50% for the first time since spring 2020, a signal of how little hiring is occurring outside of health care and government.
On
What happens next depends on the
Comparing the past week to the 1987 stock market crash is overblown. But the slowdown — and recession risk — are real.


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