• Société Générale is warning of a potential recession, even as Wall Street is broadly optimistic for next year.
  • The bank pointed to a signal in the labor market that it says preceded every recession since 1950.
  • "Either this time is different, or the US might just be slip-sliding into a profits crushing recession."
A historically reliable indicator of a coming downturn is flashing in the US job market — one that's led to a recession in every instance for nearly the last 75 years, Société Générale told clients this week.
The European bank has been warning of a potential recession in the US, and is now sounding the alarm on a signal in the labor market.
That signal is the recent rise in unemployment, with the jobless rate ticking up to 4.2% in November, per the latest jobs report. That means the unemployment rate in the US has surpassed its 36-month moving average, an occurrence that's been followed by a downturn in every instance dating back to 1950, per the bank's analysis.
Unemployment rate vs 36 month average
The unemployment rate surpassing its 3-year moving average has led to a recession in every instance since 1950, per SocGen's analysis. Datastream/SocGen
A rise in the 36-month moving average of unemployment has typically only happened when the US was already "deep into a recession," Albert Edwards, a strategist at the firm, wrote.
"Either this time is different, or the US might just be slip-sliding into a profits crushing recession," Edwards said.
Edwards, who was among the analysts to call the dot-com bubble bust in the early 2000s, has been calling for an economic downturn and stock market correction for much of this year. 
  • However, Edwards warned that soaring debt levels in the US are fueling higher profitability, a trend that many investors may be unaware of and which could reverse in a recession.
"It is much 'sexier' to latch onto a story around US corporate exceptionalism in tech. Understanding the true (fiscal) source of US corporate superior profits growth gives us a handle on figuring out just how sustainable the US equity bubble is," he added.
Other market commentators have sounded the alarm on a potential correction as indexes hit a string of all-time highs in 2024.
  • Rockefeller Capital Management's Ruchir Sharma recently warned investors that the "mother of all bubbles' was brewing given extreme appetite for US assets from global investors.
  • John Hussman, another prominent bear who's repeatedly warned of a coming crash, said markets look like they're in the "third great speculative bubble over the last 100 years."
However, among top banks, the outlook is still broadly bullish, with expectations for continued growth and pro-market policies from President-elect Donald Trump in 2025. According to the Atlanta Fed, US GDP is expected to grow 3.3% in the fourth quarter.

The unemployment rate edged higher to 4.2%, as expected. The jobless figure rose as the labor force participation rate nudged lower and the labor force itself declined. A broader measure that includes discouraged workers and those holding