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Why Haven’t We Had a Recession Yet?

This piece was originally published on November 27th, 2023.


Market pundits have been spending the last two years predicting recessions. The typical setup right now is they project it will happen in the next 2-3 quarters. Every week, I see pundits projecting a recession in 1H 2024. Many of them are the same people who have been making rolling recession predictions for more than a year.


I understand the difficulty. DKI correctly predicted last year’s recession, but I’ll fully admit that the economy has held up better than I had expected. Let’s examine what’s happening, and list the reasons we haven’t seen a recession yet.


We Actually Had One:

Early 2022 had two consecutive quarters of negative GDP growth. That’s the definition of a recession.  A government/political agency declined to declare that there was a recession, but not declaring a recession doesn’t mean it didn’t exist. Many of us would love to ignore an event and then claim the event didn’t happen. Wishful thinking doesn’t negate the existence of something that actually happened.


Plus, economist and DKI Board member, Michael (Mish) Shedlock, points out that the huge current difference between Gross Domestic Income (GDI) and Gross Domestic Product (GDP), which have to equal each other over time, may mean we’re already in a recession. For clarity, GDP is up, but GDI has been down.



Investors got worried when the unemployment rate rose by .5% to just under 4%. Historically, 4% unemployment has been considered a good number. Earlier this year, people worried when the number of available jobs fell below 10MM. That’s still a huge number and close to double the number of people looking for job. In general, American workers are employed and have received raises in the past few years. That’s led to a lot of spending, something that can hold off a recession in a consumer-led economy.


Higher Interest Rates Are Income for Many:

Much has been written about how higher interest rates are causing pain for the American consumer. That’s certainly been the case for new homebuyers. However, for savers tired of checking accounts, money market accounts, and government bond yields that were close to zero for years, higher interest rates are a source of income for families with cash reserves. It’s not just higher interest expense; but also, higher interest income.


Massive Government Spending:

Despite GDP growth, low unemployment, and a consumer that continues to spend, Washington DC is acting like they’re trying to spend us out of a recession. The government is adding trillions of dollars of stimulus into the economy. Regardless of whether that spending creates or destroys value, it all adds to GDP and will hold off an official recession determination.


The Data Isn’t Real:

DKI has been writing for years about faked government data. We’ve shown the CPI is often understated by as much as 100% helped by the switch from actual housing cost to Owners’ Equivalent Rent. The food inflation number makes anyone who’s been a supermarket in years laugh (or cry). And unless your health insurance is back at 2018 levels, you’re probably skeptical of the CPI’s accounting for that as well. The unemployment numbers exclude people who are discouraged and neither employed nor looking for a job. And the GDP numbers have trillions of dollars of wasteful government spending adding to those numbers. None of these statistics are designed to reveal anything close to the truth. We’re evaluating the economy based on made-up numbers.


We Still Have an Asset Bubble:

The Federal Reserve has a habit of keeping interest rates far too low for too long which blows up asset bubbles. Despite all the concern in the financial community about the fastest interest rate hikes in history, the equity market indexes are near all-time highs. A lack of housing supply caused by people who don’t want to give up their favorable mortgage rates is keeping housing affordability at all-time lows. Higher stock prices and housing prices make many families wealthier causing them to continue spending and keeping us out of a recession.



We had a recession last year, and will have another one at some point. It’s difficult to predict when that will happen given massive government spending combined with high asset prices, and low unemployment. Again, it’s not clear that all of this economic activity is creating value, but it is keeping the GDP numbers positive – for now. if you have any questions.


Information contained in this report is believed by Deep Knowledge Investing (“DKI”) to be accurate and/or derived from sources which it believes to be reliable; however, such information is presented without warranty of any kind, whether express or implied and DKI makes no representation as to the completeness, timeliness or accuracy of the information contained therein or with regard to the results to be obtained from its use.  The provision of the information contained in the Services shall not be deemed to obligate DKI to provide updated or similar information in the future except to the extent it may be required to do so. 


The information we provide is publicly available; our reports are neither an offer nor a solicitation to buy or sell securities. All expressions of opinion are precisely that and are subject to change. DKI, affiliates of DKI or its principal or others associated with DKI may have, take or sell positions in securities of companies about which we write. 


Our opinions are not advice that investment in a company’s securities is suitable for any particular investor. Each investor should consult with and rely on his or its own investigation, due diligence and the recommendations of investment professionals whom the investor has engaged for that purpose. 


In no event shall DKI be liable for any costs, liabilities, losses, expenses (including, but not limited to, attorneys’ fees), damages of any kind, including direct, indirect, punitive, incidental, special or consequential damages, or for any trading losses arising from or attributable to the use of this report. 

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