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Manufacturing wages in China are now 20% of manufacturing wages in the US, and manufacturing wages in India are 3% of US wages, see chart below.
For comparison, GDP per capita in the US is $76,000, in China it is $13,000, and in India $2,000.
Note: Canada, United Kingdom, United States of America and India data is for 2023. Germany, France, Italy and China data is for 2022. Japan data is for 2021. Source: ILO, National Bureau of Statistics of China, Apollo Chief Economist See important disclaimers at the bottom of the page.
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There are 10 million participants in defined benefit plans and 90 million in defined contribution plans such as the 401(k), see chart below.
Source: Department of Labor, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Many FOMC members argue that the Fed funds rate at 5.5% is very restrictive because the Fed’s r-star model says that neutral monetary policy would mean a Fed funds rate at 3%.
But maybe this r-star estimate of the terminal Fed funds rate is wrong. At least that is what the incoming data suggests.
If monetary policy is very restrictive, why are default rates going down, see the first chart?
If monetary policy is very restrictive, why is the Atlanta Fed GDP Now estimate for third quarter GDP at 2.5%, well above the CBO’s estimate of long-run growth at 2%, see the second chart?
If monetary policy is very restrictive, why is weekly data for consumer spending still strong, see the third chart?
The bottom line is that the Fed funds rate at 5.5% does not seem very restrictive.
Our latest chart book with daily and weekly indicators is available here.
Source: PitchBook LCD, Apollo Chief Economist 
Source: Federal Reserve Bank of Atlanta, Haver Analytics, Apollo Chief Economist 
Source: Redbook, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Foreign demand for US credit is near all-time highs, see chart below.
Source: US Treasury, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Visits to the Statue of Liberty and Ellis Island are back at pre-pandemic levels, see chart below and here.
Source: National Park Service, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The yield curve is no longer inverted, and the recession probability is declining, see charts below.
To understand if a recession is coming, it is a better idea to look at the incoming data than to look at the yield curve because long rates are not only a reflection of the business cycle but also foreign demand, fiscal policy, and the term premium. And the incoming data continues to look just fine, see also here.
Source: Board of Governors of the Federal Reserve System, Bloomberg, Apollo Chief Economist 
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Our latest US housing outlook is available here, and we remain constructive.
Why?
Because we only get a recession when the economy experiences a big shock such as Covid, Lehman, the IT bubble bursting, and the commercial real estate crisis in the early 1990s.
Today is not such a shock.
Today, we are experiencing a gradual slowdown engineered by the Fed. The Fed raised interest rates to slow down the economy to slow down inflation.
Inflation has now come down, and the Fed can begin to focus on other parts of the economy, particularly the labor market but also the housing market. If the Fed doesn’t like what they see, they will lower interest rates faster.
The bottom line is that the ongoing soft landing in the economy also implies a soft landing in the housing market.
See important disclaimers at the bottom of the page.
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According to data from the International Energy Agency, 90% of homes in the US have air conditioning, but only 10% of homes in Europe and 5% of homes in India, see chart below. For China, the number is 60%.
Source: The Future of Cooling Report (2018) – International Energy Agency, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The unemployment rate is calculated based on the Current Population Survey, and the response rate for the Current Population Survey was 90% in 2012, and now it is around 70%.
Similarly, the response rate has declined across other important economic indicators, see chart below, and there is a new group of “survey professionals” that make multiple entries into the same survey, which may play a role in private surveys, see also here.
The bottom line is that the incoming data is more unreliable and creates extra uncertainty for investors and policymakers.
Source: BLS, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Looking at the incoming data, the facts are the following:
1. The unemployment rate declined in August, and looking at the establishment survey and the household survey, it is difficult to see strong signs of a slowdown in job creation, see chart 1.
2. Wage growth accelerated to 3.8% in August and wage growth remains sticky well above pre-pandemic levels, see chart 2.
3. Daily data for debit card transactions shows that consumer spending has been accelerating in recent weeks, driven by spending on clothing, food services and drinking places, sporting goods, and motor vehicle and parts dealers, see the following five charts.
4. Weekly data for retail sales went up last week and remains solid, see chart 8.
5. Jobless claims have declined for several weeks, see chart 9.
6. Continuing claims have declined for several weeks, see chart 10.
7. Default rates and weekly bankruptcy filings are trending down, see chart 11.
8. The Fed’s weekly GDP model suggests GDP is 2.4% and the Atlanta Fed GDP Now says GDP this quarter will be 2.1%, see charts 12 and 13.
9. Weekly data for S&P 500 forward profit margins shows that profit margins are near all-time high levels, see chart 14.
10. The stock price of staffing firms is rebounding, which suggests that we could get a rebound in job openings, see chart 15.
The bottom line is that the US economy is not in a recession, and there are no signs of a recession on the horizon. Our chart book with daily and weekly data is available here.
Source: BLS, Haver Analytics, Apollo Chief Economist 
Source: BLS, Haver Analytics, Apollo Chief Economist 
Note: Consists largely of debit card transactions. Source: Bloomberg, Apollo Chief Economist 
Note: Consists largely of debit card transactions. Source: Bloomberg, Apollo Chief Economist 
Note: Consists largely of debit card transactions. Source: Bloomberg, Apollo Chief Economist 
Note: Consists largely of debit card transactions. Source: Bloomberg, Apollo Chief Economist 
Note: Consists largely of debit card transactions. Source: Bloomberg, Apollo Chief Economist 
Source: Redbook, Haver Analytics, Apollo Chief Economist 
Source: US Department of Labor, Apollo Chief Economist 
Source: US Department of Labor, Apollo Chief Economist 
Note: Filings are for companies with more than $50mn in liabilities. For week ending on September 5, 2024. Source: Bloomberg, Apollo Chief Economist 
Source: Federal Reserve Bank of Dallas, Bureau of Economic Analysis, Apollo Chief Economist 
Source: Federal Reserve Bank of Atlanta, Haver Analytics Apollo Chief Economist 
Note: The 12 months forward profit margins are calculated by using the weighted average of 1FY (current year estimate) and 2FY (next year estimate) to smooth out fiscal year transitions. Source: Bloomberg, Apollo Chief Economist 
Source: Bloomberg, BLS, Apollo Chief Economist See important disclaimers at the bottom of the page.
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