Hussman Weekly Commentary: Recession Risks are No Longer Dormant

Hussman Funds - Weekly Market Comment: June 26, 2006 - Recession Risks are No Longer Dormant: "In the context of slowing employment growth, a stall in aggregate weekly hours, an emerging widening in credit spreads, and other factors, my impression is that recession risks have increased considerably.
That said, we are still not at the point where I would view a recession as imminent. The main factors that would create that expectation would be a further flattening in employment growth (not necessarily a downturn, just growth in non-farm employment of less 0.5% on a 6-month lookback - which would require employment growth to average about 100,000 jobs per month or less over the next quarter or so), a weakening of the ISM figures toward or below 50 (not all declines below 50 indicate recession, but at present, such a decline would be a strong confirmation of negatives in other indicators already suggesting caution), and a further widening of credit spreads, particularly between 6-month commercial paper and 6-month Treasury bills.
For now, suffice it to say that recession risks are no longer dormant, but aren't yet acute. While we don't yet have enough evidence to anticipate a significant and impending economic downturn, the trends are continually turning in that direction, so it is becoming more a question of "when" than "if".