The prior article on the housing market explained the drop into the double-dip housing recession on 7/17/26. The United States started a housing recovery in February of this year ending the long over 3-year housing recession that no one noticed. The housing recovery, however, only ran for 5 months, from 2/18/26 to 7/17/26, and the double-dip housing recession begins July 2026.
Over the last 2 to 3 years, the housing, manufacturing and labor markets were all in recession. That typically means an overall US recession is guaranteed like every other time throughout decades of market history. Au contraire, Pierre. Keystone grew up with a classmate named Pierre. His family owned a bar in town and had no connection with France whatsoever. They simply liked the name Pierre. However, his whole life everyone asked him if he was French.
No, the housing, manufacturing and labor recessions did not cause an overall US recession. Sacrebleu! Why? How could this be? Two reasons.
First, the AI hype machine is in full swing. Note that the only people hyping the AI circus each day are the tech folks making the money off of it, and keeping their jobs. They are tap-dancing for their dinner. The bull orgy in semiconductors (chips) and data centers keeps the stock market elevated and helps avoid the overall recession. You can say that chips are now the new predicter of a recession instead of the housing and auto industries. Chips rhymes with tulips.
Second, consumer spending but mainly by the upper class. America's middle class is gonzo, tossed onto the trash heap of human history, leaving 30 million wealthy folks at the top and in control of the United States and markets, and 300 million peons at the bottom stupidly believing that capitalism exists.
The obscene Federal Reserve money-printing for two decades, and ridiculous Congressional fiscal stimulus during the COVID-19 pandemic, handing out checks like candy, created huge gains in the stock market. The easy money flows into stocks making the already wealthy super rich while the 300 million peons are peed upon. Such is crony capitalism filth.
The super wealth created in the stock market with easy money creates the wealth effect for those lucky individuals. They did not earn anything for the huge increase in their wealth over the last decade. Plain and simple, they were handed the wealth since they owned the stock market. One-half of Americans do not own a single share of stock. The Fed's money printing sends stocks higher and the wealthy class dances with glee. Fed governors and employees are rewarded for their dovish money-printing by speaking at lucrative token luncheon events at the Wall Street investment banks after they leave office. That is the quid pro quo. Are you starting to understand crony capitalism filth?
The wealthy class is sleeping on bags of money, courtesy of the Fed's monetary stimulus and Congress's fiscal stimulus, making them feel on top of the world with a burning desire to spend some of this easy money dough that was accumulated only because they owned stocks. This consumer spending due to the wealth effect keeps the overall recession wolves at the door unable to enter the house.
It is easy to understand that when the AI bubble pops, and stocks drop making the wealthy class at the top feel a bit less rich, and their spending habits drop, the overall recession will likely, finally, show its ugly face. Of course, a policy mistake by the Fed, perhaps at the 9/16/26 rate decision meeting, may also create an overall recession. Raising rates will completely crush the housing sector but if inflation is allowed to linger it would be death by a thousand cuts.
For now, the 5-month housing recovery failed, and we are 2 months into a housing recession. At the next Housing Starts release on 9/17/26, the Starts would have to be 1.775 million units or higher to flip the housing recession back into a recovery. That is a tall order especially when the last number was 1.2 million units.
The government shutdowns, that created sh*tty data for a few months, should finally normalize in the path ahead. It has been sloppy with big 1.5 million unit numbers reported in February and March only to be followed by a pitiful 1.2 million in June. The numbers are all over the map but should start to line out better.
The last time Housing Starts were above 1.7 million units was back in 2022 so do not hold your breath that the housing recession will end. The housing recession appears ready to stay on and linger into perhaps through the Fall.
The stock market and economic game will be decided by the housing, manufacturing and labor markets versus the AI hype and wealth effect.
Manufacturing activity has strengthened the last couple months as the data center building hype is all the rage. However, maybe folks are getting a bit too excited about jobs and manufacturing since states are placing limits and regulations on data centers. They will have lots of hoops to jump through to build the data centers so perhaps the joy in manufacturing is a bit overdone in the near term. People are protesting yelling, "BANANA!" and "NIMBY!" ('build absolutely nothing anywhere not anytime' and 'not in my back yard').
Thus, mathematicians say thus and therefore a lot, that is why Keystone's invitation to the end of summer gala was lost in the mail, the housing, manufacturing and labor markets, and AI hype and wealth effect, will mix together, stirred by Chairman Warsh, and decide if an overall US recession appears in the weeks and months ahead.
Young folks under 40 years old never saw a true economic recession except for the COVID-19 pandemic turmoil. If you are under 40, spend some time thinking about what you will do when your boss sh*t-cans you drop-kicking your sorry arse into the dumpster at the far end of the parking lot. Unemployment will pay you for about 6 months. It is better to plan ahead and hope it does not happen. If you are a couple, go through your budget numbers based on you losing your job, and then on your significant other losing their job, and then if both lose your jobs. Save your money.
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