There remains speculation around the actual state of the United States economy, with data signaling that a recession might already be underway.
Analysis of data from the National Bureau of Economic Research (NBER) suggests that the economy could be in a downturn, a factor not acknowledged by relevant authorities, according to The Kobeissi Letter outlook shared in an X post on September 19.
The platform noted that, historically, the NBER takes an average of 10 months to declare a recession after it begins officially. This delay means the economy is often profoundly affected when a recession is acknowledged.
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One notable example of this delay occurred after the COVID-19 pandemic in 2020 when the institution did not confirm a recession until 16 months later, even though the economy was declining.
Similarly, during the 2008 financial crisis, the NBER took a whole year to declare a recession long after the economic damage had started to unfold. This pattern points to the possibility that the economy frequently experiences a downturn before it is officially recognized, which might be the case now.
Stock market performance and recession announcement
In this context, The Kobeissi Letter analysis was illustrated with data from Real Investment Advice, reflecting S&P 500 market performance versus NBER’s recession dating. The data indicated that there had been market declines before the formal announcement of a recession.
For example, during the 2007–2008 crisis, the S&P 500 had already plummeted by over 50% before the recession was formally acknowledged. This delayed response is further highlighted by the fact that before 1979, there were no formal recession announcements, making it difficult to gauge the true timing of past downturns.
Given the current state of the economy and the lag inherent in economic data releases — which are often subject to revisions, as seen recently with labor market figures — it is entirely plausible that the U.S. is already in a recession. Indeed, one of the notable job revisions accelerated in 2024. Specifically, the Bureau of Labor Statistics (BLS) revised job growth figures downward for four of the first five months of 2024, Finbold reported back in July.
This notable revision highlighted that the U.S. economy might not be as healthy as previously thought.
Meanwhile, away from the timing analysis, Bank of America (NYSE: BAC) projected that the U.S. might not face a recession in 2024. Based on the August outlook, BofA pointed out that the Federal Reserve’s efforts at taming inflation are working, alleviating fears of a possible recession.
Impact of Fed rate cut
In the meantime, attention has turned to the Federal Reserve after the agency initiated its first rate cut in four years. The stock market reacted positively, with most equities turning green and indices like the S&P 500 hitting new record highs.
However, some market players maintain that a major economic downturn remains on the horizon despite the Fed’s rate cut and the resulting stock market rally.
For instance, JP Morgan (NYSE: JPM) CEO Jamie Dimon downplayed the rate cut, noting that it was minor. For months, the executive has warned about the economy’s health, with his concerns centering around potential stagflation and the weakening of the labor market.
“It’s not going to be earth-shattering. <…> It doesn’t mean that much.<…> Underneath that, there’s a real economy,” he said.
At the same time, there are concerns that the market might hit new highs before plunging, and it remains to be seen if this scenario will play out in the current environment.
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