Financial FAQs
The Conference Board’s Index of Leading Economic Indicators (LEI), a read on actual economic data rather than an opinion survey as its Conference Board’s Consumer Confidence Index, has called a recession. Its Confidence Index is hinting at the same.
“Besides persistently weak manufacturing new orders and consumer expectation indicators, labor market developments also weighed on the Index with an increase in unemployment claims and a decline in average weekly hours in manufacturing. Overall, the LEI suggests that economic activity will continue to slow.” Conference Board
Is that really a surprise? President is attempting to bring back a Gilded Age that prevailed in 1900 by steering as much business to his oligarchs and himself as possible by deregulating while slashing government programs that protect all Americans, and rounding up working immigrants that has badly hurt the job market.
The LEI forecasts business activity six months ahead has been forecasting a possible recession for some time, but now says it is here.
Why? “Its widespread weakness among the LEI’s components and a negative growth rate over the past six months triggered the recession signal in August,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board.
The graph shows where its LEI components dropped below the horizontal red line at the start of past recessions. The blue line of the LEI graph shows the two recoveries since the 2001 and 2008-09 recessions and its current low in August (gray bars are recessions).
Consumers weren’t much happier in the confidence survey. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—decreased by 1.2 points to 74.8. Expectations remained below the threshold of 80 that typically signals a recession ahead, said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. .
The LEI is nowhere near past recessionary lows, per the graph, and stock indexes are at record highs. Then why does its LEI keep predicting an incipient recession?
It partly because consumers’ appraisal of current job availability declined for the eighth consecutive month in the survey, and it is the most heavily weighted LEI component. We now know what consumers must have already been intuiting. There were -991,000 fewer jobs created over the past year and one half in the Labor Department’s just released benchmark revision.
Chairman Powell has been hinting of late that the Fed has no good choices in deciding whether to ease credit conditions by cutting interest rates or not, because the job market is deteriorating and inflation has been rising since April 2 when Trump first announced his tariff war on the world.
The September rate cut of -0.25% was the first since last December and Powell said there will probably be two more cuts by the end of the year to support more job creation.
Why the job weakness? There were just 22,000 hires and the unemployment rate rose to 4.3% in August. The hires were in the Leisure/Hospitality, Education and Health sectors. Manufacturing, Construction, Professional Services and Government (state and local included) lost jobs. And initial jobless claims for workman’s comp have risen to a three-year high.
And there is widespread weakness among most of the LEI’s components, such as fewer hours worked. Businesses had in effect stopped adding workers, because not knowing what the final tariff rates may be. This is enough to shake consumers’ confidence in their future.
Add to that the demoralizing effect on hourly wage earners in construction, manufacturing that require manual labor and mostly employ immigrants, the target of the ICE raids.
The financial markets are more focused on how to spend the record profits of big business, hence the hysteria over AI, TikTok, IPOs, and the irrational exuberance that has driven the stock indexes to record highs.
In fact, it’s what is looking increasingly like the last Gilded Age where a small group of the extra-wealthy partied while the US economy as a whole declines.
It can be reversed, of course, if Republicans have enough cajónes to stop Trump from weakening almost every sector of the American economy that creates growth, from consumer and environmental protections, healthcare, to national security (e.g., NATO by alienating our allies).
Consumers are extremely on edge and their behavior determines what happens next, and the poorest largely live in the red states. Republicans will be the most affected.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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