- David Rosenberg, founder of Rosenberg Research, made the claim on Friday.
- The announcement came a day after the third quarter employment statistics were lower than expected.
- Former Merrill Lynch expert explained why concerns are warranted in a note to clients
An economic consultant who accurately predicted the 2008 recession has once again expressed skepticism about the U.S. economy, saying a course correction is underway.
David Rosenberg, founder of Rosenberg Research, made the declaration Friday, hours after the April jobs report came in worse than expected.
The U.S. economy added 175,000 jobs last month, lower than the 238,000 expected by economists.In a note to customers on Friday, the former Merrill Lynch’s chief economist explained why he thinks the numbers are concerning.
He said the data is inconsistent with numbers coming from: The U.S. Bureau of Labor Statistics’ Quarterly Employment Wage Statistics Dataset and Business Employment Dynamics Dataset both say the economy actually lost jobs in the third quarter.
Given this disparity, Rosenberg said the data is likely “exaggerated by historical proportions.”
Regarding his belief that there will be further downward revisions, Rosenberg said, “I don’t think any revisions will be made for another six months, and if they were to be announced, it would be shocking not only for the Fed but also for the market.” It’s going to happen,” he said. A few months away.
“The Fed will now remain on the sidelines as it closely monitors lagging and contemporaneous indicators that are littered with highly inaccurate indicators,” he added.
“And the longer we wait, the more we will have to do on the interest rate side.
‘1991, 2001, 2008 shades [all over again.]’
In addition to believing the employment statistics are distorted, Rosenberg argued that stock prices and valuations that have risen in recent months are also out of touch with reality.
The warning, announced in a separate note to customers written on April 23, argues that the bubble created by the soaring stock prices of artificial intelligence-focused companies may be about to burst. As evidence of this, investors pointed to the decline seen from AI proponents like Nvidia in the past few days.
“Last week’s market action was part of the air leaving the AI balloon, with Nvidia experiencing its worst single-day decline since March 2020,” he said. He explained this by citing statistics that show how much sputtering is achieved. From 2022 onwards he will be 100%.
“The intense upward momentum driven by AI is now reversing,” he said.
At the time of writing, NVIDIA’s stock price has since recovered slightly, falling to about $60 below its peak in March of this year.
Regarding discrepancies between BLS data sets, he criticized the methods the agency uses to collect data, citing the way the BLS surveys a sample of businesses to produce its monthly reports.
He said the disparity could be due to low response rates and the Department of Business’ inability to accurately identify whether a business has closed.
As a result, the BLS Business Employment Dynamics dataset showed that the U.S. economy lost 192,000 jobs in the third quarter of 2023, while the regular nonfarm payrolls survey showed that the U.S. It showed that the economy gained 640,000 jobs during that period.
BLS’ quarterly employment and wage statistics data also showed that job growth slowed significantly in the third quarter of last year.
He said he expected some amendments to be made in the coming months as authorities get to the bottom of various data sets.
He has become increasingly bearish about the economy in recent years and is adamant that another recession is possible.
So far, his prophecies have not come true. This was not the case 16 years ago, when the index accurately predicted the 2008 recession due to the presence of a death cross where the index’s 50-day moving average fell below its 200-day average. It shows that the momentum is weakening.
This pattern, which effectively tells investors that prices have deteriorated over a short period of time, was seen in January 2008 prior to the financial crisis, when the blue-chip index plummeted by 30 percent over the subsequent 12 months. .
The same pattern was seen before the crash of 1929 and before the three-year bear market of the 1930s, when the S&P fell 83.4%.
In March 2022, just before the recent AI boom, a definitive pattern re-emerged
Rosenberg, who was at Merrill Lynch when he predicted the financial crisis, said at the time that the Dow Jones was “at serious risk of a super-bearish ‘death cross.'”
Meanwhile, the Dow Jones Industrial Average has experienced a surprising decline over the past month, which appears to be consistent with Rosenberg’s warning.
It closed Friday at about 38,675.68, up 2% since the beginning of the year.
Meanwhile, Rosenberg’s remarks, aside from serving as a double whammy of sorts for the warnings the financier has already issued, have led to a coalition of billionaires including Jeff Bezos and Mark Zuckerberg. The move comes weeks after the company suddenly sold millions of dollars in blue-chip stocks, sparking fears of a recession. Financial disaster.
They include JPMorgan President Jamie Dimon, who warned that the year ahead is “uncertain” when it comes to finance and painted markets as “too happy” and ready for a recession. Ta.
“Many economic indicators continue to be positive,” Dimon, 67, said after the first quarter of 2024 results.
“However, as we look to the future, we remain vigilant against a number of significant uncertain forces.”
He said the “unstable” global situation, including “horrific wars and violence” was to blame, and “persistent inflationary pressures are and are likely to continue.”
He went on to say, “While we do not know how these factors will play out, we must prepare for a wide range of potential environments,” adding that those preparations are “to ensure that we ‘ he claimed. [JPMorgan Chase] You can always be there for your clients. ”