A comprehensive gauge on the health of the US economy dropped in August for the sixth straight month, reinforcing concerns about a possible recession.
The Conference Board said Thursday that its Leading Economic Index for the United States dipped last month. The index, which tracks a range of metrics capturing activity in the jobs market, manufacturing, financial markets and housing, is designed to detect when recessions are coming.
Among the 10 components in the index, all but two were in negative territory over the past six months.
Ataman Ozyildirim, senior director of economics at The Conference Board, said the six-month slump for this index is “potentially signaling a recession.”
“Economic activity will continue slowing more broadly throughout the US economy and is likely to contract. A major driver of this slowdown has been the Federal Reserve’s rapid tightening of monetary policy to counter inflationary pressures,” Ozyildirim said, adding that The Conference Board projects a recession in the coming quarters.
Recessions are officially declared by a panel of economists at the National Bureau of Economic Research and that determination typically comes long after the downturn has actually begun.
“Recession dynamics are building steam,” Gurleen Chadha, US economist at Oxford Economics, wrote in a note on Thursday. “Corporations should pull back on the labor market reins leading to slower employment growth.”
Fears of a looming recession have been triggered by crushing inflation, the Fed’s massive interest rate hikes and back-to-back quarters of declining gross domestic product during the first half of this year.
However, many economists say the jobs market remains too strong for the US economy to be in a recession. During recessions, businesses resort to widespread layoffs, and economic reports indicate that is not happening right now.
New numbers released on Thursday showed that initial jobless claims rose only slightly last week and remain near the lowest level since May.