Must-read: Tim Duy: “On The Dispersion, Or Lack Thereof, of Economic Weakness”

Must-Read: Tim Duy: On The Dispersion, Or Lack Thereof, of Economic Weakness: “I direct you to my fellow Oregon economist Josh Lehner…

…who correctly notes that in comparison to past recessions, the decline in manufacturing activity is not well-disbursed across the sector…. During a recession, the vast majority of manufacturing industries (or all!) are declining. We are nowhere near that point…. And if manufacturing is not even in recession, it is difficult to see that the US economy [as a whole] is in recession. Or even nearing it…. A recession in Texas does not a US recession make….

Aside from the recession risk, there is another important aspect of Davies’s chart–discounting manufacturing, it indicates growth of just 2% in the US…. I suspect that is the direction we will be heading by the end of the year if not sooner. Key sources of growth, such as autos, multifamily housing, and technology, that helped propel the economy closer to fully employment are likely leveling off. If so, that means the economy is at an inflection point as it transitions back to trend. The Fed expects that process will require addition tightening. The financial markets aren’t so confident.