October 2024 Enki Recession Index (ERI) Report

As October closes, the Enki Recession Index (ERI) stands at 0.747, underscoring significant caution surrounding the U.S. economy. This reading reflects an economy where job additions, seasonal hiring, and hurricane recovery efforts have stabilized the unemployment rate at 4.1% but masked underlying labor market weaknesses.

Key Observations and Historical Parallels

1. Labor Market Instability:

   • Despite robust job additions in sectors like health care and government and seasonal boosts, the unemployment rate remains elevated compared to last year’s 3.8%. The slight decline in the unemployment rate due to temporary employment may be short-lived, with permanent job losses rising and long-term unemployment edging up. This suggests a labor market under strain, where gains are masking contraction risks, especially as seasonal positions phase out post-holiday season.
     

2. Yield Curve Concerns:

   • The yield curve, sitting flat at 0.13%, signals that investors remain cautious about the long-term outlook. This low level has historically preceded economic downturns, adding weight to the risk of a prolonged slowdown.
     

3. Manufacturing Sector Struggles:

   • The Manufacturing PMI dropped further to 46.5%, marking seven straight months of contraction. Key industries like transportation equipment and fabricated metals have faced reduced demand and supply disruptions. Manufacturing’s contraction recalls early 2001, when the tech sector was holding up an otherwise weak economy. Today, service sectors like health care and government provide resilience, but the manufacturing downturn signals potential vulnerabilities.
     

Broader Implications for the Economy

With an ERI reading of 0.74781, October’s data suggests that underlying economic weaknesses are masked by temporary job gains, similar to the tech-driven support seen in early 2001. While some sectors appear stable, manufacturing contraction and a flat yield curve hint at broader stress. As seasonal employment tapers off, we may see deeper impacts in early 2025, with labor and market contractions becoming more visible.

The Enki Recession Index advises caution, as the economy’s resilience faces significant challenges beneath the surface. Keep an eye on next quarter's GDP.