- The Fed's big rate cut won't stop a recession, economist David Rosenberg says.
- He's concerned about weaknesses in housing, commercial construction, and the industrial sector.
- "As was the case in 2007 as the cycle was turning, all of a sudden the data underwent significant revisions," Rosenberg said.
Economist David Rosenberg is digging in his heels on his call for a recession to hit the US economy.
The economist, who has wrongly predicted that an imminent recession will hit the US economy since 2022, dismissed the rosy scenario of a soft landing and goldilocks growth in a note on Thursday.
Rosenberg's bearish call comes one day after the Federal Reserve delivered a jumbo 50 basis point interest rate cut, the Fed's first rate cut since 2020.
The stock market boomed within 24 hours of the Fed's decision, with the broad major market indexes soaring to record highs in Thursday morning trades.
But Rosenberg isn't backing down, likening 2024 to 2007, right before the economy slowed and entered a painful recession.
"The best thing I ever did was to follow my instincts and judgement and not waver or throw the towel in. It feels very much the same to me today," Rosenberg said.
Rosenberg's reasoning centers on his belief that there is still "so much weakness in so many parts of the economy," with housing, commercial construction, and the industrial sector "all in recession."
The only thing holding everything together, according to Rosenberg, is the consumer, but they can pull back abruptly.
"As was the case in 2007 as the cycle was turning, all of a sudden the data underwent significant revisions," Rosenberg explained.
The BLS recently revised job growth lower by 818,000 jobs from April 2023 through March 2024, which Rosenberg highlights as a similarity to prior moments right before a slowdown in the economy.
"When you read what business contacts were telling the Fed district banks in the latest Beige Book, it contained the same language we saw in July 1990, March 2001, and December 2007," Rosenberg said.
He added: "Half the country is in recession right now when we apply data science to the commentary."
As for the soaring stock market, Rosenberg says investors should heed the warning signs coming out of the bond market.
"The bond market is actually telling me that our macro call is on track, and it is the bond market that tends to be much more prescient, especially at inflection points in the economic cycle," Rosenberg said.
Rosenberg warned earlier this month that the de-inversion of the yield curve is a recession signal that should not be ignored.
Finally, he noted that despite the big Fed rate cut on Wednesday, the central bank is "now just as much behind the growth curve as it was behind the inflation curve over two years ago."
"I will not be duped," Rosenberg said.
