Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. DING! — Is anyone DAZED AND CONFUSED — Inflation is up, but so are wages and hiring. Sentiment is way down, but spending is chugging along. Financial conditions are tight; the labor market is tighter. It’s confusing! We wrote yesterday about how the pinballing between scary inflation numbers and robust jobs data is driving a back-and-forth over whether the U.S. economy is teetering or still pretty healthy. MM asked a few economists what they see as the most important leading indicators (apart from hiring and inflation) of whether the U.S. is near or in a recession. You’ll want to bookmark these for the months ahead. Diane Swonk, chief economist at Grant Thornton: “The most interest-rate-sensitive sector out there is housing and that’s the one to keep an eye on, because that is the first one into a recession in what would be a typical Fed tightening cycle, which we haven't had in a long time.” Swonk said she watches new home sales and builder cancellation rates. “The latter is the highest since the onset of [the] pandemic but not in a recession yet.” Matthew Luzzetti, chief U.S. economist at Deutsche Bank: “Continuing jobless claims are the best real-time indicator of recession. … There’s been some rise in initial jobless claims, which suggests that there has been some pickup in layoffs, but it appears as though at the moment the people who get laid off find jobs relatively quickly elsewhere, because continuing jobless claims haven’t shown much of an updrift.” Megan Greene, global chief economist at Kroll Institute: “If we’re excluding employment data, I’d say consumer and business spending are the most useful. We know there is a huge cash cushion for households (in aggregate) and corporates and so there is no immediate need for retrenchment. “But there’s a chance we talk ourselves into recession as consumers and businesses cut back in anticipation of a downturn, and that is a matter of psychology rather than economics.” Dana Peterson, chief economist at The Conference Board: “We are closely watching leading and coincident indicators for the United States. The composite coincident economic index suggests that we are not in a recession currently. The leading economic index is trending downward suggesting that economic weakness, or even potentially recession, is on the horizon.” Tiffany Wilding, North American economist at Pimco: “Historically, some of the best leading indicators are as follows: Yield curve, equity performance, housing permits, hours worked, durable goods new orders, ISM and consumer expectations. The performance of all of these indicators suggest an increasing probability of recession over the next 12 to 18 months.” Rubeela Farooqi, chief U.S. economist at High Frequency Economics: In addition to jobless claims, “the confidence measures are also important and give us a timely reading on consumer attitudes. A recent collapse — the Michigan sentiment was at an all-time low — is certainly pointing to a more cautious stance from households going forward. The consumption data are already showing slower momentum after the recent revision, which led us to revise down our forecast.” IT’S TUESDAY — Behold, the deepest view yet into our universe’s past, courtesy of the James Webb Space Telescope. Meditate on that for a while. Then send us your tips and ideas! kdavidson@politico.com, aweaver@politico.com, or @katedavidson or @aubreeeweaver.
| 
