US data creates recession scare

NEW YORK: There are a few words no one likes to hear in economics, but the most feared might just be "recession".

And after Friday's economic data misses from both the Bureau of Labor Statistics' jobs report and the ISM's non-manufacturing Purchasing Manager's Index, which measures the health of the services economy, there are a few voices that have uttered this feared term.

Barclays' economists brought up worries of a possible recession after the jobs report number. "Since 1960, when payroll growth has dipped below its recovery-period average, the US economy has more often than not found itself in an NBER defined recession 9 to 18 months in the future," said Barclays.

"Hence, that payroll growth has fallen below the current expansion average in three of the past four months signals to us that risks of a near-to medium-term recession have risen."

JP Morgan's proprietary model that gauges the risk of a recession starting over the next 12 months also hit its highest mark since the financial crisis on Friday. Most of this was on the back of lackluster economic data.

"With the rally in risk markets over the last month, our models based on financial market pricing now see a recession risk moderately below our model based on macroeconomic data," says JP Morgan." Since last week, we have seen disappointments in the Dallas Fed measures of manufacturing and nonmanufacturing sentiment, the ISM nonmanufacturing index, and the Conference Board measure of consumer confidence." Edgerton followed that up by highlighting the decline in profit margins. When profits margins decline it is an indication that a recession is not too far away.