Consumer confidence rebounds but the economy is in a 'quiet recession'

Danielle DiMartino Booth, CEO, QI Research, explains why the economy may not be as strong as it appears on the surface.

Transcript

00:00Danielle, you've talked about some of the data points that warrant these rate cuts.

00:04You've also said that there's this quiet recession happening here in the U.S.

00:09What are those recessionary signs that you're seeing, and why is there a disconnect?

00:14Because so much of the narrative is around the Fed, at least until this point, achieving this so-called soft landing.

00:22Well, you know, it's interesting you ask, because tomorrow morning at the meeting,

00:25they're going to have the latest revisions to quarterly payroll growth.

00:30We know that in the second quarter of 2024, for example, with the data that's going to be released tomorrow morning,

00:36that there were net job losses in the second quarter of 2024.

00:42We expect to see a continuation of that negative momentum that is demonstrating to the Fed when the U.S. economy entered recession.

00:50Of course, layoffs only begin after recession has begun.

00:55They're a lagging indicator.

00:57And the fact that we've seen net job losses begin more than a year ago, again,

01:02is going to be very problematic for a lot of the members of the Federal Open Market Committee who are leaning more dovish.

01:09But, Danielle, the conference board just released the Consumer Confidence Report,

01:13and it showed that confidence actually rebounded in July.

01:16We're starting to see signs of strength in the consumer again.

01:19What do you make of that?

01:20Well, I think what you're seeing in the read-through there, and again, if you look inside the conference board's report,

01:26the jobs hard to get measure actually increased.

01:29In other words, it's harder for American workers to get a job.

01:33What you're seeing is the disinflation start to come through these confidence reports.

01:38Same with the University of Michigan.

01:40We're seeing quickly falling inflation expectations on households' parts, which is fabulous news.

01:46It's great news for the U.S. household that really has been debilitated by a rising cost of living.

01:52But, again, what you're seeing adds fodder, if you will, adds another element of argument for those who are dovish to say,

02:02hey, U.S. households are perceiving inflation as being lower going forward,

02:07but yet they're seeing the ability to secure employment actually getting to be rougher, tougher.

02:12So those are definitely in tension with one another.

02:18Tension is actually a word I bring up because that's a word that Powell has been using to discuss the tension between the inflation

02:25and the other dual mandate, the employment mandate, that the Fed has to comply with.