I guess signs of recession will be a new series. Whoop-die freakin' do.
Here are some apparently mixed signals from employment flows.
Net employment flows between unemployment and employment have taken a sharp turn into recessionary territory.
But, on the other hand, flows from out of the labor force, into employment, are very strong - at least as strong as 2004-2005.
The flows in 2004-2005 were related to the huge migration flows out of the Closed Access cities during the housing boom. In 2006, flows into employment dropped dramatically - from unemployment, and especially from out of the labor force. This is because the Federal Reserve inverted the yield curve and purposefully slowed down real residential investment. The beginning of the collapse of the mortgage markets that resulted, both reduced funding for new homes in Contagion cities and reduced the pressure on the housing stock in the Closed Access cities. So, the first effect of the recessionary conditions of 2006 wasn't for unemployment to rise, it was for those migration flows out of Closed Access cities to dry up.
The interesting thing about that migration was that it wasn't a traditional migration to employment. There were plenty of jobs in Closed Access cities. It was migration due to cost, which is this super-duper way we have decided to run an economy these days, with a virtual wall surrounding our most dynamic labor markets so that we naturally segregate by income and skill, with a rent-soaked high income urban core and a deprived rural inland.
So, the decline in migration in 2006 didn't lead to unemployment. Those households who were now staying in the Closed Access cities were employed. They were just economically stressed by costs in spite of being employed. Rent inflation shot up in 2006 and 2007 while housing starts collapsed and this migration pattern sharply declined.
So, I don't expect to see the same patterns as we move into this recession, because that migration pattern isn't in place today. Households are already stuck in the high cost Closed Access cities because for a decade we have made sure to prevent housing and mortgage finance from recovering.
I don't know if there are any home runs that can be hit in this context. I'm not sure there are any obvious areas of excess valuation or systemic risk. This could be sort of a mix of 1991 (relatively mild stock market shock) and 2001 (relatively mild pause in housing expansion) and there certainly isn't much upside in bonds to prepare for. I'm not sure there is much to do but wait for the Fed to blame something else for the recession after they crimp the money supply too much and give themselves permission to do QE4. I hope it happens sooner rather than later.