There are troubling signs of a looming recession even as economic numbers remain strong, economist Elliot Eisenberg said Oct. 8 during the Bank Holding Company Association fall seminar in Edina, Minn.
Eisenberg was apprehensive over the recent rise in unemployment to more than 4 percent without an increase in firings. Unemployment remained little changed in September at 4.1 percent, according to the Bureau of Labor Statistics. He was also concerned by a jump in credit card delinquencies, especially for 20-to-40-year-old customers. The 30-day delinquency rate for outstanding credit card balances increased in the second quarter of the year to 3.25 percent — its highest mark since 2011 — from 3.15 percent in the first quarter.
Even if a recession occurs, the impact to government and health care sectors is usually limited, Eisenberg said. More affluent Americans are doing better while lower wage earners are struggling to get by, he noted. The savings rate is less than 3 percent, which Eisenberg deemed "troublingly low."
Despite softening economic conditions and tight government fiscal policy, Eisenberg cited the uninterrupted growth in consumer spending along with corporate investments in plants and inventories as positive signs. Companies are still building plants to produce batteries and chips.
Eisenberg criticized presidential candidates Donald Trump and Kamala Harris for their economic policies. Trump's policies will increase the debt at a faster pace than Harris, while possibly igniting a trade war through tariffs, he added.
"It doesn't matter much economically who wins, because at the end of the day we are going to turn the lights on one way or the other," Eisenberg added.
Eisenberg said he wasn't concerned about the trade deficit Trump often cites as a national security threat to the country, referring to it as resulting from consumers choosing to save and invest their money.
Describing the state of the mortgage market, Eisenberg said the pace of home price appreciations has slowed as home sales are soft. Single-family home starts are strong while multifamily starts are weaker.
Eisenberg attributed the Federal Reserve's role in the relatively healthy economy to luck. He claimed the Fed is behind the curve. Ten of the last 13 times the Fed raised interest rates resulted in a recession, Eisenberg noted: "The Fed has no idea where they are going, zero."
Eisenberg, who cited the steep drop in banks nationwide to approximately 4,400 this year from 14,000 in 1985, said it makes sense for banks to sell to maximize earnings during the current cost environment.
