Rosenberg: If US Consumer Gets Spooked, We'll Get A Recession

David Rosenberg recently spoke with FS Insider to discuss his key investment themes and ideas for 2020. David discusses corporate debt levels, the recent decline in a number of leading indicators (see below), why the US consumer will be key in 2020, as well as his biggest call and investment idea for this year. David Rosenberg is the Chief Economist and Strategist of Rosenberg Research and Associates.

Here's what he had to say...

What is the most important thing you are watching for 2020?

"There's lots of things to talk about between coronavirus and Chinese growth and, of course, the November elections…but I think that the big question from a macro perspective for this year is whether the resilient US consumer—what I call ‘Consumerica’, which is 70% of US GDP and 20% of global GDP—will the US consumer, which has been amazingly resilient, will it stay that way?"

Are there signs that ‘Consumerica’ is beginning to falter?

"I'm getting a knot in my stomach looking at some of the leading indicators… There's no question that the labor market has held up remarkably well but the Challenger numbers showed a huge increase in layoff announcements across many cyclical sectors, including manufacturing, which had until recently been a positive news story."

challenger layoffs

"And I'm seeing a precipitous decline in hiring announcements. So layoffs are on the rise, hirings are going down. Remember, these are announcements. This is what human resource departments are doing right now to prepare for the next 12 months. So this is a good leading indicator. There's also something else called the JOLT survey—the Job Opening Labor Turnover survey, which shows you what's happening with the labor market looking under the hood into the engine. And once again, I'm noticing a very significant reduction that's going on beneath the surface. In other words, I'm starting to notice that the hiring rate is going down. I'm starting to notice that the level of job openings are really a critical barometer of labor demand has not just carved out a peak, but it's hooked down substantially over the past six months…"

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