Renowned economist Henrik Zeberg is warning that the global economy is on the brink of a severe downturn that could eclipse the 2008 financial crisis.
His analysis indicates that the illusion of economic strength is breaking, with both leading and coincident indicators signaling an imminent recession.
For instance, Zeberg noted that non-farm payroll growth has slowed, industrial production and retail sales are rolling over, and prior job gains have been overstated, marking a convergence of weakness that confirms the long-anticipated downturn is beginning, he said in a Substack post on November 28.
“I believe this coming economic bust will not only eclipse the 2008 financial crisis, but could even rival the Great Depression of the 1930s,” he said.
The economist noted that more signs of a crash are emerging from the fact that the American consumer, who drives roughly 70% of GDP, is showing acute signs of fragility.
Struggling households
To this end, after facing the highest inflation in four decades, households have depleted pandemic-era savings and are burdened by over $1 trillion in credit card debt, with interest rates exceeding 20%.
Rising delinquencies on auto loans and credit cards, along with increased bankruptcy filings, point to a consumer pulling back on spending. Consumer confidence has collapsed to levels reminiscent of the worst months of the 2008–09 crisis, triggering declines in auto sales, home renovations, and discretionary purchases.
While the labor market has appeared resilient, Zeberg noted that employment is a lagging indicator, and cracks are starting to show.
Job openings have fallen, hiring plans are being trimmed, and layoffs and hiring freezes have begun in tech, housing, finance, and retail sectors.
At the same time, revisions to monthly payroll data indicate slower growth than initially reported, and temporary-help employment, a leading labor indicator, has been declining. Zeberg predicts that the unemployment rate could surge from the current 3–4% to 6–8% within months once the recession fully unfolds.
Possible deflationary depression
Overall, Zeberg suggested that the U.S. could face a deflationary depression first, followed by a stagflationary reset, signaling not just the end of a business cycle but potentially the end of the current monetary era.
Indeed, the economist has been vocal about his warning on the economy, stating that most investment assets are likely to crash.
However, before the collapse of assets such as stocks and cryptocurrencies, investors should expect a period of euphoria in markets that could drive record highs before the massive downturn.
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