Is the US Economy Headed for a “Wile E. Coyote” Moment?

But now, if you take Washington’s word for it, the economy is back on track with no recession in sight. 

The White House asserts, “Bidenomics Is Working.” And U.S. Bank Wealth Management’s senior investment director, Rob Haworth, says, “The positive data we’ve seen so far this year seems to be striking down the ‘wall of worry’ over the potential of a recession in the near term.”

Okay, so what about the long term? 

Is the “positive data” painting an accurate picture of America’s future?  

Or have we just managed to stave off the inevitable with Band-Aids over leaks in an economic dam?  

Experts are divided. 

And nobody is certain about what may be coming next. But there’s no denying we are seeing some of the hallmarks of a possible downturn appearing in America right now. 

One of those hallmarks is a reduction in consumer spending. 

The post-pandemic consumer spending surge, which may have supported the apparent positive economic surge over the last few months, is starting to cool. And according to The New York Times, “forecasters expect spending to continue to cool as rising interest rates and dwindling savings take a toll on consumers’ pocketbooks.” 

This is an eye-opening development following a cautionary New York Times report in June that said:  

“For much of this year, Americans have continued to shell out for cars, vacations and restaurant meals, helping to offset weakness in other sectors of the economy, like business investment and housing. If that changes, a recession could become inevitable.” 

Michael Farr, CEO of Farr, Miller & Washington, agrees and says, “The spending train has to come to a stop eventually. American consumers depleting their savings will likely bring the economy closer to an inflection point.”  

That inflection point may be inching closer fast because the “toll on consumers’ pocketbooks” that The New York Times mentioned is a growing reality. 

Fox Business says, “The San Francisco Fed even predicts that excess savings U.S. households built up during the pandemic will likely be exhausted this quarter…”    

And as consumers continue to face higher prices at the gas station, the grocery store, mortgage payments and almost everywhere else… inflation just posted its biggest increase in 14 months.  

According to the Lending Club’s “New Reality Check: The Paycheck-to-Paycheck Report,” it’s taking a heavy toll… as 61% of adults said they’re living paycheck to paycheck.  

So, we may not be in a recession yet, but for many Americans, it already feels like we are. 

Unfortunately, consumer spending cutbacks also mean vital US companies are feeling the stress. And shrinking corporate revenues are another strong indicator of economic contraction. 

Tyson foods, for example, one of the nation’s biggest food suppliers, is closing four more chicken facilities to “reduce costs and improve capacity utilization.” 

This means they’re not bringing in enough revenue to support growth. So, they’re cutting costs and trying to get the most out of what they have. 

This is troublesome because… 

Jobs are lost when plants close.  

Not just facility jobs, but all the way down the supply chain from truckers to retailers. 

And lost jobs mean not only lost income but also a loss in US tax revenues — which is another potential indicator of recessionary trouble ahead. 

In August 2023, Otavio Costa, strategist for Crescat Capital, tweeted, “US state and local governments just experienced the worst decline in income tax revenues ever recorded. This was the second steepest year-over-year percentage decline in history, with only the GFC having a worse outcome. Note that Federal tax receipts are also dropped again, now at recessionary levels and approaching -10% on a YoY basis. This is a clear indication of the continued fundamental deterioration of the economy…” 

But perhaps one of the most telling potential recession indicators right now is… 

The developing commercial real estate downturn. 

Steep interest rate increases have been chipping away at commercial real estate owners’ ability to meet their mortgage payments. And Business Insider says, “market commentators have warned that commercial property prices could tumble by as much as 40% from their peak in a worse disaster than the 2008 financial crisis.” 

Many cities have vacant office buildings.  

And nobody is buying. 

Tesla CEO Elon Musk says, “Commercial real estate is melting down fast” and warned “Home values next.” 

And according to Fox Business, billionaire investor Jeff Greene says, ‘“Retail, offices, apartments — every aspect of real estate is going to get whacked. I think we’re just in the first inning [of a correction].” 

Meanwhile, the recent economic uptick that Washington and the mainstream media are reporting may have been fueled, in part, by high consumer spending earlier in the year.  

But now with inflation rising again, interest rates climbing, consumer spending dropping, savings dwindling, businesses shrinking, shrinking tax revenues, so many Americans living paycheck to paycheck… 

Plus, a potential commercial real estate crisis on our hands… 

Fervent claims of a recovering economy may be premature.  

Especially since the Fed continues to hike rates to cool inflation — a move that could have a delayed impact on the economy. 

Founder and CEO of DeVere Group, Nigel Green, agrees and says, “It takes around 18 months for the full effect of rate hikes to make their way into the economy — and that’s where we are.”  

But the St. Louis Fed says the stress may appear sooner since one of the most reliable recession indicators of all — the inverted yield curve — shows “there is a relatively high probability of recession in the next 12 months.” 

Of course, no forecast is certain. 

But if they’re correct, America’s “Wile E. Coyote moment” may be just around a few more sharp turns in the economic road. 

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