Manulife Investment Management has published its most recent report to investors, entitled The signals and the noise: Three minute macro. In it they say the odds of recession are better than even with some economic indicators flashing red, “many of them deeply red,” they add.

Given the strong job market in the United States, investors ask how a recession could possibly be in the works. “That’s the number one question we get every day, and it’s absolutely a fair one,” they write.

“How can we – and the majority of economists – see a recession in this type of environment? The simple answer is that the economist’s job isn’t to tell us where we are now, it’s to explain where we’re heading next.” 

They continue, saying that lagging indicators, such as job growth, are still in positive territory, but those showing where the economy will be in six to 12 months are sending warning signals to the economists. They add that they also think it reasonable to expect that traditional lags between job growth and the economy might be even larger in the current environment, post COVID.

The report goes on to look at inflation, and energy prices and concludes with a discussion about interest rates. “One of the most important drivers of price pressures ahead remains oil prices. And all signs point to energy remaining a material drag on inflation,” they write.