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Kudlow Points to 4 Recession Warning Signs

Larry Kudlow, former National Economic Council director under the Trump administration, says there are multiple leading indicators pointing to a recession in 2023.

Ever the optimist, however, who “believes in the greatest of the soul of the founding of the United States of America,” the Fox Business host says there are a few important actions the government can take to restore the US as “stewards of economic prosperity.”

The Biden administration needs to “immediately open the spigots to produce more oil and gas—allowing permitting, pipelining, refining. All that would reduce prices, promote jobs, and economic growth.”

Kudlow, who also served in the Reagan administration, calls for a reduction in the welfare state and for Trump’s business supply-side business tax cuts to become permanent.

If these very simple yet critical actions were taken, Kudlow says, “inflation would crash, the economy would soar.”

4 Recession Warning Signs

Currently, however, Kudlow fears the US economy is in jeopardy and points to four clear signals of an economic recession in 2023.

The first is the Conference Board’s leading indicator, which he calls a “highly accurate forecasting tool” based on 10 key data points—including interest rate spreads, consumer expectations, manufacturing, stock prices, and building permits for new homes.

The Conference Board now forecasts 2022 gross domestic product (GDP) growth will come in at 1.8% and 2023 GDP will slow to zero.

Second, is the money supply, or M2, a measure that Nobel Prize winner Milton Friedman championed. M2 has ballooned under President Biden’s “massive increase in federal spending that led to an equally massive money printing by the Federal Reserve,” Kudlow says.

“That was the single-biggest mistake by Joe Biden,” he maintains. “It moved the inflation rate up from about 1% to nearly 10%. Because of that, real wages have fallen 18 consecutive months.”

Third, Kudlow says, is the Treasury bond yield curve inversion between three-month bonds and 10-year treasures. Right now, the yields, respectively, are 4.30% and 3.80%, which Kudlow calls “a very alarming sign.”

The fourth gauge of a looming recession in 2023, he says, is actually a slew of bad economic news that cannot be ignored—not least of which are the housing downturn and manufacturing slowdown.

Inflation slowing

The US Federal Reserve does appear to be conquering inflation, however, making Kudlow optimistic that inflation will come down slowly over the coming months.

Given all the pitfalls that Kudlow sees, however, avoiding or lessening a recession will be far more difficult a task.

He ends his opening commentary from the Nov. 22, 2022 edition of “Kudlow” saying he hopes legislators will wake up and “replace utopian socialist schemes that always cause recession and impoverishment wherever they are implemented.”

“I know we can right this ship.”

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