What the Experts Aren’t Telling You About the Looming Recession

The financial landscape has been fraught with uncertainty, and the possibility of a looming recession is on everyone's mind, even though the mainstream media is doing everything it can to quell concerns about it. To get some answers, I spoke with Chad Willardson, a renowned financial expert, and founder of Pacific Capital of Corona, Calif.

As we've reported, economic conditions triggered the Sahm Rule — a historically reliable recession indicator — earlier this month, and then we experienced a huge market sell-off that increased fears of a recession. Despite this, there’s a growing debate in the media about whether the Sahm Rule's trigger signaled the start of a recession. Even Claudia Sahm, the economist who developed the rule, has somewhat softened her stance on a looming recession.

Willardson notes that while it's reliable, it's not foolproof. "The economy is a complex beast," he explained, adding that there’s been increasing debate about what qualifies as a recession. He said it is “kind of like looking at the weather forecast.”

“There are a lot of variables and everything could change quickly,” he said. “Forecasted rain and lots of clouds don’t always turn into a storm, but it might be best to bring your umbrella just in case.”

In other words, while the Sahm Rule’s trigger is concerning, it’s only one of many variables at play. That said, Willardson points out that the signs of an economic slowdown are undeniable.

"High prices and interest rates are definitely putting a strain on domestic demand," he told me. “Whether we're officially in a recession or not might depend on who you ask, but the slowdown is real.”  He noted that companies are making significant cuts, hiring freezes are common, and many stores have closed locations over the past year. 

While official labels matter to some, the lived experience of businesses and consumers suggests that we’re already feeling the effects of a downturn. Of course, the market has shown signs of recovery, leading some to believe that the feared recession might be less severe — or perhaps avoided altogether. 

Willardson urged caution in interpreting these signals. 

"Market recoveries can be deceiving," he warned, pointing out that the stock market “is not the best barometer for people tracking recessions” because it doesn’t reflect the underlying economic fundamentals. He drew a comparison to the early days of the pandemic when the stock market rebounded even as the broader economy and labor market struggled. In short, while market bounces can be heartening, we shouldn't take them as the final word on the economy's health.

I'm concerned that financial experts could be deliberately downplaying concerns about a recession because of the upcoming election. When I asked Willardson if this might be the case, he told me that some experts “might be focusing too much on certain metrics while ignoring others."

For sure, the media and other commentators may have their own reasons for either highlighting or downplaying the likelihood of a recession. But for Willardson, what truly matters is the data from the labor market, consumer confidence, and spending habits. “These metrics will objectively show us what’s happening and there are lots of signs that we’re not just heading into a recession, but we’re already there,” he said.

Willardson identified several red flags that suggest that a recession is either imminent or already underway. "We're seeing a combination of factors: rising unemployment rates, cooling consumer spending, massive layoffs, and a slowdown in GDP growth," he noted. "It's like seeing dark clouds gather; you might not be in the storm yet, but you know it's on the horizon and it may already be raining and windy in certain areas."

As for when the recession might officially begin, Willardson is cautious. "It's impossible to predict," he admits, especially given the varying definitions and interpretations of what constitutes a recession. However, with so many indicators already flashing red, if a recession hasn't started yet, it may only be a matter of time before it does.