Making Hay Monday – September 15th, 2025
Making Hay Monday
Special Recap Edition: Part I
“The man who makes no mistakes does not usually make anything.” -Edward John Phelps, 1889
“After adding back to many of my gold miner positions in early summer, I trimmed back some of my positions in August, due to the very strong gains and general prudence. I’m trying to hit the right balance of protection against continued dollar debasement and the increased risk of a currently unforeseen selloff in gold that could hit the miners harder.” -Fred Hickey, mining investor extraordinaire, from his latest newsletter.
Did We Miss It?
Shutterstock
Might there be an unexpected answer to our title question that has been vexing me, and many other alleged experts, for the last two years? Namely, did the recession that myriad economic indicators were strongly suggesting was barreling down on us already happen?
Based on the recent 911,000 downward revision to the U.S. jobs market, that is not an unreasonable question, despite that official GDP numbers indicate an on-going expansion. As you can see from the followingZeroHedge chart, what we’ve seen over the last few years has been unprecedented, at least since the Great Recession.
In fact, it’s fair to note that the cumulative negative adjustments to payrolls over the last three years exceeds what occurred during the worst economic downturn since the Great Depression. (To be fair, the total number of employed in the U.S. today is materially larger than it was 15 years ago, as I covered in a recent Haymaker Daily.)
As far as critical data that have been in the danger zone since 2023, here is a quick synopsis of bullet points and visuals:
First up, is the ultimate go-to for forward-looking economic divination: the venerable Leading Economic Indicators (LEIs). As you can see, and as we have previously noted, it’s been in a doozy of a bear market beginning in 2022, albeit with a slight bounce since 2023. It will be crucial to see if the recent rollover continues, especially given the weakness in jobs and the housing market.
Chart of U.S. LEIs since for the past 25 years
Bloomberg
Right in line with the LEIs, U.S. manufacturing new orders have a most recessionary look to them, as you can see from the below chart, courtesy of John Kemp. This confirms the view from those of us, like the geriatric Haymaker, that the industrial side of the economy has long been in contraction mode.
Kemp
As a matter of fact, the non-manufacturing side of the economy hasn’t been looking all that resilient, either. The good news is that this remains above prior recession levels. Yet, it does beg the question of what might happen to the overall economy should job losses – aka, firings – erupt from here.
Kemp
Next up is the following chart from the University of Michigan’s Institute for Social Research, and its Director of Surveys of Consumers headed by the highly regarded Joanne Hsu. As you can see, this hit subterranean levels back in 2022, rebounded a bit, and has returned to a point roughly equivalent to what was registered during the Great Recession.
This has been puzzling, in light of the supposed non-recession in recent years, given that consumers represent around 70% of U.S. economic activity. It also stood in stark contrast with what was officially reported to be a robust labor market… at least until the revisions came into view.
But there’s more… including Canada’s most celebrated economist, David Rosenberg, who has been challenging the purportedly robust jobs numbers for years. Even before the aforementioned draconian downward revisions, he was pointing out that the average monthly increase in net new jobs was just 35,000 for the three months from May of this year through July. As he wrote on this topic in early August:
Over the past six decades, every time the three-month moving average of headline job creation has been +35K or less, the U.S. was either in a recession or just coming out of one. (emphasis added)
The reason I bold-treated that last phrase was because maybe that’s what’s happening… or has happened. If that seems improbable to you – and it does to me – consider another formidable source, Bloomberg’s chief economist, Anna Wong.
Here’s what she said in the wake of last week’s epic downward revisions:
Bottom line: The preliminary job revisions flag a strong possibility that the economy entered a recession last year, and recovered after the Fed cut rates in late-2024. Our interpretation of recent data — factoring in our estimate of future revisions — is that the labor market may have re-entered another slump in 1H25, with a low in June. We think we’re either still in recession, or in the early phase of a new business cycle.
No economist I follow has been as adamant that the labor market was far weaker than the Bureau of Labor Statistics (BLS) was telling the world than Danielle DiMartino Booth. This has also led her to conclude, similar to Anna Wong, that a recession started late last year, if not earlier.
Last week, post the benchmark revision stunner, she ran this table driving home how weak the private sector labor market has been vis-à-vis jobs conditions in the government realm. (As a footnote, this is based on the QCEW, or Quarterly Census of Employment and Wages, from March of 2024 through March of 2025, per the first image above from ZeroHedge. It’s a far more accurate tally of labor conditions than the monthly Non-Farm Payroll reports which captivate Wall Street at the time of their release but have become increasingly inaccurate.)
Booth
As you can see, about 97% of the expunged jobs were in the private sector. That’s obviously not good, yet it’s consistent with the reality that government-related job creation has been driving the employment bus in recent years.
Returning back to David Rosenberg, one of the very few economists to warn of the housing bubble 20 years ago, well before it popped, here’s a recap of that he wrote in the aftermath of the QCEW bombshell:
Year-over-year growth in non-farm payrolls is down to just 0.9%, a clear indicator of recession risk. There are eleven post-war cases where nonfarm payroll growth was close to or below +1.0% and all eleven were during or right before a recession.
There you have it: an 11 for 11 recession forecasting accuracy track record concerning the ultra-critical labor market. That is certainly concerning indeed. But this still leaves open the question about whether the downturn is now in the rearview mirror.
If that’s the case, the stock market’s ebullience in the face of a recession is unprecedented. One could make the case that the shellacking equities experienced in 2022 was the recessionary reaction but, if so, it was mighty early and extremely brief. Yet perhaps that’s simply the way things work in an era of massive federal deficits, hyper-speculation, and abundant liquidity from multiple sources. Unquestionably, the gap between government revenues and spending has no parallel in an expansion… unless we haven’t been in one for the last two years, after all. (Thanks to the indefatigable Luke Gromen for the following alarming image.)
Gromen
Of course, there is data that leans the other way. As the always-balanced Gerard Minack, my mate from the Downunder Daily, wrote last month:
… wage growth remains perky. The employment cost index measure of wages increased by 4.1% at an annual rate in the June quarter. Median pay for full time workers increased by 4.8%.
That certainly doesn’t seem recessionary to me. However, he wrote last week that he’s on high alert for signs that firings are accelerating, rather than just softness in hirings.
Still, if a recession began last year, it’s very odd to see this type of wage growth which, fortunately for consumers, exceeds CPI (if it can be trusted; a big “if” I realize).
If I sound confused, it’s because I am. Based on the above, I don’t know how anyone can feel certain in their no-landing/soft-landing/hard-landing outlooks. As I’ve said on a few recent podcasts, when you mix in the uncertainty caused by the highest tariffs in 100 years, it’s a set of circumstances none of us have seen in our lifetimes.
What I do know, however, is that the Wall Street consensus is all-in on the no- or soft-landing scenarios. And it’s that certainty in highly uncertain times that creates the potential for a powerful negative reaction in the event that a recession is starting… or is still underway.
Accordingly, in the investment action items section to follow, I am discussing some previously endorsed securities that may warrant a bit of position size reduction. Fortunately, a number of those have had surprisingly fast and robust run-ups, a development that pleases me and, more importantly, I hope it does you, as well…
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