'Rolling Recession' Zapping U.S. Economy: Investment Analysts

Wall Street is baffled by this economy. The labor market is thriving. US unemployment is at its lowest level since 1969. GDP and retail sales indicate that the economy is still expanding, Nicole Goodkind reported for CNN.

Photo Insert: While the broader economy has thus far escaped a National Bureau of Economic Research (NBER) designated recession, various segments have experienced their own cooldowns and some economists say this perplexing phenomenon is the product of a "rolling recession."

Yet, US manufacturing has likely already contracted into a recession, housing sales have plummeted, tech layoffs keep coming and corporate earnings growth is souring. So, is the US economy heading towards a soft or hard landing? Or maybe no landing at all?

While the broader economy has thus far escaped a National Bureau of Economic Research (NBER) designated recession, various segments have experienced their own cooldowns and some economists say this perplexing phenomenon is the product of a "rolling recession."

That's when an economic downturn sweeps slowly across the economy, impacting sectors one by one.

"A rolling recession — where various sectors of the economy take turns contracting rather than simultaneously — is in progress," wrote Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist of SS Economics, in a note last week.

During COVID lockdowns, money was funneled into the goods sector because there was very little access to services as consumers quarantined in their homes. Then, as the economy reopened, pent-up demand caused a huge surge in services.

That created "pockets of weakness in many categories on the goods side, certainly in housing, that are definitely in recession territory," said Liz Ann Sonders, chief investment strategist with Charles Schwab. The economy hasn't fully retrenched because "we've had the offsetting strength on services," she said.

"We continue to think the economy will suffer from rolling recessions, evidenced by the fact that corporate earnings growth is now entering its downturn," wrote Sonders in a note on Wednesday.

So far, about 42 S&P 500 companies have issued negative earnings guidance for the first quarter of 2023, while just eight have issued positive guidance. About 69% of reporting companies missed analysts' expectations for the last quarter, according to data from Refinitiv.

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