Economists say the US will head into another recession if the consumer sentiment trend continues


According to two economic economists, employment and wage growth suggest otherwise – but the US economy looks set to slide into another recession based on declining consumer sentiment.

New Research Published last week by David Blanchflower of Dartmouth College and Alex Bryson of London University College, Consumer Expectancy Indexes from the Conference Board and the University of Michigan tend to predict a recession in 18 months.

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They found that every decline since 1980 was caused by at least a 10-point drop in the expectation indices. Other credible indicators include a single monthly rise of at least 0.3 percentage points in unemployment and two consecutive months of employment decline.

“However, the economic situation in 2021 is exceptional, because unprecedented direct government intervention in the labor market has enabled employment rates through Furlough-like systems to recover quickly from the big downturn in 2020,” wrote Blanchflower and Bryson. “However, downward movements in consumer expectations over the past six months indicate that the economy is now entering a recession in the United States (Autumn 2021).

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The Conference Board’s expectations level fell to its lowest level since November of September last year, marking its third consecutive month of decline. At the same time, the University of Michigan gauge actually increased last month.

Economists highlighted Conference Board expectations in March 2021 and then fell 26 points by September 2021. At the same time, Michigan data peaked in June 2021 and fell by 18 points in August.

Economists have said that the US is currently heading toward a recession, with “clear downward margins in consumer expectations” over the past six months. While that is not reflected in the recruitment situation — the unemployment rate is declining and the economy is adding jobs, albeit at a slower pace than expected — it has probably played a big role in keeping the US government ahead of the labor market.

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“It seems to us that by the end of 2021 the US will have all the chances of entering the recession,” he wrote.

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