Strong retail sales in January and a 10 percent rise in the stock market over the past three months may seem to signal a recovering economy. But bellwether activity, primarily on the West Coast, indicates a sharp and broad-based sector-diffused moderation is on the horizon, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.
In his economic forecast, released today (March 1), Dhawan said that “existing home sales are down almost 40 percent from a year ago, and home price appreciation has stalled everywhere, but more so on the West Coast, where job cuts by tech titans indicate that both the sectors are in a clear recession.”
“Although January retail sales were far better than expected after two bad months, much of that can be attributed to 70 million seniors receiving a considerable cost-of-living increase in their Social Security payments, triggering a month of growth. But that will not translate into sustained sales growth month after month,” Dhawan said, adding that “car sales also were good because finally there was no longer a chip shortage. But this sector is highly interest-rate-sensitive. Car sales will moderate as the impact of past Federal Reserve rate hikes is felt in coming quarters.”
Dhawan noted that the Fed, which has worked to curb inflation by raising rates by 400 basis points over the past nine months, “is not about to back off instituting more rate hikes in the next few Federal Open Market Committee meetings while it waits to see the desired impact on taming inflation.”
“Real moderation will arrive in terms of lack of job growth, which will first appear in the corporate sector, due to cautious CEOs and chief financial officers (CFOs) who do not anticipate runaway consumer spending prospects in the next 12 months.”
An early indicator of negative job growth is already in play: Hiring of workers in the temporary help sector has ceased. In…
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