These are crazy times. Wildfires in Canada produced dark skies over eastern Canada and the northeastern United States and some of the worst pollution on record. We are only in mid-July and the peak fire season hasn’t begun. Record high temperatures are being experienced in the southern United States on a daily basis. Severe rain, flooding and flight cancellations are being experienced in the northeast.

Former President Trump was indicted for a second time this year, the first time a previous President has ever faced charges after leaving office. There are possibly two more indictments to come.

The Vegas Golden Knights, in their sixth year of existence, won the Stanley Cup while the six Canadian teams in the National Hockey League, where hockey in the national sport, haven’t won the cup in 30 years. The screen actors and writers have gone on strike together for the first time in 63 years.

Looking at the broader economy, manufacturing has been contracting on a year/year basis. Retail inventories are bloated. As fears of the pandemic faded, consumers switched back to buying services. High mortgage rates are resulting is less building and less freight. According to Bob Costello, Chief Economist and Senior VP of the American Trucking Association, all freight indicators are contracting on a year/year basis. Supply is contracting; demand is contracting. There is still too much supply. The Spot Market is much worse than the Contract Market. Despite the US Federal Reserve’s aggressive monetary policy, the economy has not yet entered a recession.

Friday’s surprising U.S. January jobs number raised multiple questions about the status of the American and Canadian economies and the prospects for a recession in 2023. The figure of 517,000 non-farm jobs created in January was significantly higher than the market estimate of 187,000, and the job creation figures for the previous five months. Despite the ongoing series of Fed rate increases, unemployment fell to 3.4%, the lowest figure in 50 years. “Today’s jobs report is almost too good to be true,” wrote Julia Pollak, chief economist at ZipRecruiter. “Like $20 bills on the sidewalk and free lunches, falling inflation paired with falling unemployment is the stuff of economics fiction.”

Growth across a multitude of sectors helped propel the massive beat against the estimate. Leisure and hospitality added 128,000 jobs to lead all sectors. Other significant gainers were professional and business services (82,000), government (74,000) and health care (58,000). Retail was up 30,000 and construction added 25,000.

Reorganization of the New Economy

In a Sunday interview with Margaret Brennan, host of Face the Nation, Gary Cohen, Vice Chair of IBM, and former chief economic advisor to President Donald Trump, stated that these statistics point to a “reorganization of the new economy.” He expressed the view that the “service economy is regaining strength.” He noted that “the occupancy rate in offices in major cities is over fifty percent.” Service sector employees (parking attendants, restaurant workers) are needed to support workers in offices. Even though many employees are not returning to the office, 5 days a week, there is still a need for service industry employees to support them as they, and their colleagues, move from their dens to their offices, several days a week. It appears that as many people try to normalize their lives, as the pandemic crisis subsides, more hotel and airline personnel are also being hired.

As 2022 comes to a close, there is much concern that world economies may experience a recession in 2023. There are a host of worrisome economic indicators that appear to be trending in this direction.

Inflationary Forces

The large government Covid relief payments created inflationary effects. The shift from on-site to stay-at-home workers triggered a transition to buying goods versus services. It also produced supply chain disruptions and more inflationary pressure. The war in Ukraine and Russia’s use of food and energy as economic levers, have precipitated spikes in the cost of these essential goods. Consumers have been feeling the effects for months of high prices for food and energy. Food banks are receiving record numbers of visits, a clear sign that many consumers are having trouble making ends meet.

Whether you obtain your news from TV, newspapers or social media, it is hard to escape the drumbeat of downbeat updates about the North American and global economies. The negative news is puzzling to those people who monitor some of the leading, and still positive, economic indicators.

As noted in a recent paper by Jim Allworth, Co-Chair of the RBC Global Portfolio Committee, 5 of the 6 most commonly tracked economic indices on the bank’s Recession Scorecard are still positive. These include:

Unemployment claims