Three important pieces of U.S. economic data came out today; all stronger than expected, but with more context to consider;

2nd quarter real GDP; survey 1.8%, released 2.4%. It is normal for GDP to be strong before a recession, and this GDP isn’t that strong comparatively. Compare this release with GDP months before the last two economic recessions (ex. COVID recession). On 7/28/2000, Q2 2000 GDP was first released at 5.2% (survey 3.8%), the recession began 8 months later in March 2001, the 2-year yield peaked in May of 2000. On 10/31/2007, Q3 2007 GDP was first released at 3.9% (survey 3.1%), the recession began two months later in December 2007, the 2-year peaked in June 2007. A strong Q2 GDP number is not indicative of “no recession” or “soft landing.”

June Durable Goods Orders, the core number (excluding transportation) was strong (survey +0.1%, released +0.6%), but this series has grown just 0.5% over the last 12 months. The year-over-year trend has fallen from 30.7% to nearly 0% over the last 2 years; consistent with a near recession.

    Jobless Claims; There is no better leading indicator of the labor market than initial jobless claims. Claims rise reliably ahead of a recession. Jobless claims have risen since their trough in September of last year but have fallen over the last month. It is impossible to predict what they will do in the short-term and they may continue to fall, but given the many other signs of recessionary pressure, I expect the recent drop to eventually be another deviation from the trend (ratchet down) like we have seen twice already.