Is Hard Landing Rapidly Becoming (Again) the Dominating View for the US Economy?

investing.com:

Just when you thought it was safe to assume that the soft-landing fix was in, the bond market has thrown a wrench into the machine. So it goes with the constantly shape-shifting risk profile for the US business cycle. Most of the time the changes are relatively trivial. Is this time different?

Reading the latest headlines suggests that a recession in the near term is once again a high, or at least higher, risk compared with recent history. Bloomberg, for example, captures the new macro zeitgeist today by reporting: “Fed’s Bid to Avoid Recession Tested by Yields Nearing 20-Year Highs.”

Meanwhile, DoubleLine Capital founder Jeff Gundlach posted on X earlier this week:

“The US Treasury yield curve is de-inverting very rapidly.  Was at -108 bp a few months ago.  Now at -35 bp.  Should put everyone on recession warning, not just recession watch. If the unemployment rate ticks up just a couple of tenths it will be recession alert. Buckle up.”

The latest estimate of US payrolls from ADP for September paints a darker profile too, raising concerns that tomorrow’s payrolls report from the Labor Dept. could trigger a new warning. Meanwhile, ADP advises that hiring at companies last month slowed to the softest pace since January 2021.

If a new recession is brewing, it’s unlikely to start in the third quarter. As reported yesterday by CapitalSpectator.com, the latest median nowcast for the government’s initial Q3 GDP report due on Oct. 26 is a robust 3.1% rise in output – well above Q2’s 2.1% increase.

The outlook for Q4 and early 2024, however, has deteriorated, if only modestly, compared with a month or so earlier, when Treasury yields were lower and relatively stable. As recently as Sep. 15, for instance, Ashok Varadhan, co-head