The American consumer is what ultimately determines whether or not a recession happens, and it’s easy to be optimistic about the consumer, said David Rosenberg, chief economist and strategist at Gluskin Sheff, who had been a long-time bear.
“I’m confident that as feeble as the economy is right now, we are going to escape an actual downturn,” Rosenberg told CNBC’s “Worldwide Exchange,” ahead of Friday morning’s release of the government’s January jobs report, which was a bit softer than expected on nonfarm job growth, compared to two previously strong months.
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While Wall Street is laser focused on earnings, he believes many are overlooking the positive picture employment is painting. “Corporate earnings, are only 15 percent of national income, when push comes to shove, there’s nothing more important than employment because it supports 70 percent of the economy.”
“When you look at the historical record, it takes a massive shock to cause the economy to go into an actual recession. There are pockets of the economy that are weak right now … manufacturing … the strong U.S. dollar, and [oil] inventories of course, that to me is temporary,” Rosenberg said.
While the consumer may not appear to be firing on all cylinders, Rosenberg said to be patient. “The winners from the oil price decline, those gains accrue with a lag.”
“So right now, we’re building up this scenario that we’re going to have a recession,” he continued. “I’m not there.”
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Putting the consumer aside, Rosenberg pointed to other areas to watch out for when trying to determine whether a recession is coming, such as personal income, business sales and industrial production, which he says is already in some sort of recession.