OK, Moody’s actually put the odds of a recession at 49%. The yardstick is within the next year. That is one of their highest figures in the last several years. The trigger that sent the odds up is the energy crisis, which appears to be worsening by the day.
Moody’s Analytics chief economist Mark Zandi told Euronews, “behind the recent jump are primarily the weak labour market numbers, but almost all the economic data has turned soft since the end of last year.”
It does not require a genius to figure out the balance of the concerns. The February employment data from the BLS shows that “Total nonfarm payroll employment edged down by 92,000 in February, and the unemployment rate changed little at 4.4 percent.” Few people would be shocked if that got worse when the data is revised next month.
The oil price shock is mostly a shock at the pump. A typical family spends about $2,000 on gas. If the price goes from about $3, where it was a month ago, to $5, the figure moves to $3,300. The median household income in the US is about $83,000. Trim that for taxes, and the figure falls closer to $70,000. And then there are the people whose incomes fall below the median.
Because oil is used for diesel, jet fuel, heating oil, and petrochemicals, the high cost of oil prices flows through the supply chain to hundreds of thousands of businesses and tens of millions of Americans.
It is worth remembering that when Russia invaded Ukraine, oil moved to $100 a barrel in March 2022. Gas prices were at $5 by June. What is happening now could quickly become a carbon copy of that. However, the primary reason oil moved up then was the Russian supply. The supply problems are much broader than that today
Another challenge to the economy is how long the oil interruption lasts. Even if it ends today, it will take weeks to get refineries back only and move oil-bearing ships back to their normal schedules.
Moody’s may be moving those odds for a recession higher, soon
Top Gaining Stocks
Top Losing Stocks