Taps Coogan – January 4th, 2022

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The following chart, from S&P Global, shows the severe contraction in the US manufacturing PMI to ‘46.2’ for December, down from an already-contractionary ‘47.7’ in November.

The 47.7 reading in December is a level typically associated with a recession. As S&P 500 noted in the report “The latest data signaled the fastest decline in operating conditions since May 2020, and was among the sharpest since 2009.”

As we’ve noted before, quite a lot of emphasis has been placed on the presumed discontinuity between the flat-to-negative GDP of 2022 and the recession that most analysts see us entering this year. Most of that seems to stem from continued strength in the labor market. However, as we noted in one of the first articles here at The Sounding Line, labor is a badly lagging indicator. Several past business-cycle peaks in employment have occurred after an official recession was declared.

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