Chance Finucane - Oxbow Advisors - Interview Series 2023 - Eric Basmajian - August 14, 2023

TL;DR

Business cycle analysis suggests an imminent recession, with leading indicators contracting and cyclical indicators weakening. The housing market is showing signs of softening, especially in new home construction, while the labor market is experiencing job losses in cyclical industries.

Transcript

foreign Chief investment officer at Oxbow advisors today in the interview series I'm lucky to be joined by Eric basmatian the founder of EPB research Eric specializes in business cycle analysis he's steeped in financial history he studied all the financial crises going back to the Tulip bubble in 1636 and his work is often cited by legendary econom... Read More

Key Insights

• 👨‍💼 Business cycle analysis follows a predictable sequence, but the time delays between different steps can be unpredictable.
• 🥺 Leading indicators are contracting, indicating an imminent recession, while cyclical indicators are slowing down.
• 🤘 The housing market is showing signs of softening, with declines in new home prices and a decrease in transaction volume.
• 🌸 The labor market is weakening, with job losses observed in cyclical industries.
• 👷 Residential construction is a leading indicator of economic activity, while non-residential construction falls under the lagging or non-cyclical category.
• 👪 Existing home prices remain relatively stable, while new home prices are experiencing downward pressure.
• 🥺 The labor market's leading indicators show a margin squeeze and job losses in cyclical industries.

Questions & Answers

Q: How do leading economic indicators inform the analysis of business cycles?

Leading economic indicators provide insights into the availability of money and credit, which can affect various sectors of the economy. By tracking these indicators, analysts can anticipate changes in the business cycle.

Q: Why is the construction sector important in analyzing the cyclical economy?

Residential construction is a leading indicator of economic activity, as changes in this sector can affect employment, consumer spending, and other economic variables. Non-residential construction, on the other hand, falls under the lagging or non-cyclical category due to longer project timelines.

Q: What are the current trends in the housing market?

While the housing market has experienced a decline in transaction volume, the declines in home prices are mainly concentrated in the new home market and specific regions such as the West Coast. Existing home prices have remained relatively stable due to low supply.

Q: How do leading indicators of employment inform the labor market outlook?

Leading indicators of employment, such as weekly hours and temporary help workers, provide insights into companies' margin squeeze and their response to reduce costs. The decline in these indicators suggests a weakening labor market, with job losses expected in cyclical industries.

Summary & Key Takeaways

• Business cycle analysis follows a predictable sequence, but the time delays between different steps can be unpredictable.

• Leading economic indicators are contracting, indicating an imminent recession, while cyclical indicators are slowing down.

• The housing market is showing signs of softening, with declines in new home prices and a decrease in transaction volume.

• The labor market is weakening, with job losses observed in cyclical industries and a decline in temporary help workers.