The US economy for recession is excessive based on jobs and market data

The asymmetry in financial reporting has always been obvious. Bad news tends to be amplified, and good news tends to be under-reported.

Still, over the last week or two, things have gone a bit overboard. I will admit that President Donald Trump has not helped his case, but I will argue that the recession talks have gained much more traction than justified based on the evidence available.

The natural state of the United States and the world economy is growing. If this condition looks at risk, the news media will of course be aware of it. Accidents are covered; the usual flow is not.

The United States economy is on a solid footing, and although there are dangers out there, a recession is not nearby.

People are concerned about the idea of ​​a recession, but not of the economy

Internet search largely carries the idea that the recession is most narrative-driven, rather than data-driven. Google searches for "recession" have spiked quite recently, but searches for "unemployment benefits" have not.

Compare this to the period leading up to the 2008 recession. Search for "unemployment benefit" increased regularly before searches for "recession" increased. It may be argued that benefits are filed only after someone has lost their job, but it is quite clear that the simultaneous correlation between these two series is much lower today than it was between 2008 and 2009. Despite concerns about the recession, consumers continue to point to a strong labor market.

Similarly, search interest appears to be somewhat higher in the United States than the rest of the world, although the world economy is believed to be far more fragile than the United States.

Actual economic data is still strong

Washington Post, under the headline "Month Trump's economy faltered," reported that "bad economic news continued" as "US Steel may be temporarily laying off up to 200 workers at the Michigan plant. "

We understand why this exposes a political vulnerability to the president of a state he barely won in 2016. But if layoffs are the concern, context may be important. The level of initial unemployment requirements has been running at the nearest record low for several months, even after the trade war started in earnest in early 2018.

Similarly on "Meet the Press", Chuck Todd said: "Manufacturing went down in August. Why is this important? This is the first time production has seen a contraction of almost a decade. "Again, the idea is to reveal a political vulnerability to Trump in a critical industry in states Trump needs to win.

Read more: The doomsday warnings about the US housing market get it backwards

But in reality, while production output has been drastically modest, performance over the past year has remained better than the 2015 to 2016 period. In fact, employment in industry is up this year. Todd adds that "perception is almost as important as reality." He plays a small role in shaping that perception.

High-frequency data is not exactly screaming recession either. We were hit by a recent Bloomberg News report that said "the US economy has sputtered in recent days." This was a strange statement, as the projections for the current quarter's GDP tracking in the week before the article were released due to a strong retail report.

Yes, there have been weaknesses in production, but the recent recession has been surprising since economic data generally outperforms economists' expectations, as evidenced by a surge over a number of different data surprise indicators. Of course, this may change, but it is strange to discuss the recession as US data beats consensus estimates.

The market also undermines the idea of ​​an imminent recession

The tax curve has also received a good deal of coverage. Trump himself has been aware of this, apologizing for the "crazy inverted yield curve." So we expect the press to highlight this. In addition, the curve has been a reliable indicator of a recession, as many reporters are also quick to highlight .

But nuance is important. In advance of a recession, we see a bearish flattening of the yield curve as short-term interest rates rise faster than long-term interest rates. During the last two recessions, the Federal Reserve raised interest rates even after the yield curve was reversed! That is certainly not what is happening today.

Instead, we have seen a bull flat out the yield curve. This means that long-term interest rates have fallen faster than front rates. Three-month invoice returns have fallen 50 basis points over the past year, as 10-year interest rates have plunged above a full percentage point. The Fed has cut after this inversion, and it is expected to continue.

Interestingly, other swings in the asset markets are nowhere near as priced for the recession as the Treasury market.

Corporate credit is a good example. As a measure of risk-taking in the corporate credit market, the excess bond premium has proven to be a fairly useful recession indicator. The odds today are quite low.

Stock volatility has picked up somewhat, but has certainly been higher lately. Shares are down about 6% from recent highs. We have seen similar sales in equities no less than 15 times since 2010.

None of this is to let the president retire. A continued escalation in the trade war may tip the United States into recession the next year, but it is still very much a forecast. Let's not talk about it as if it were a reality today.