“The conclusion I come to, slightly annoyingly, is that while it is possible for the Fed to keep those plates spinning, it will be very difficult. If CEOs react with caution as they complete the 2020 business planning season and decide to reduce capacity by downsizing expected headcount (initially by not hiring, reducing over time and then later shedding labour), then weak data will persist into Q1 2020, and the much-touted recession will be upon us. The Federal Reserve will respond by cutting rates aggressively, probably starting with a 50bps reduction. But that will only become evident next year since Powell has boxed the Fed into waiting with a data-dependent approach."
Of course things don't have to play out that way (and I still see a decent [if only seasonally-based] chance for more upside as this year closes out), although I'm not liking some of the latest forward-looking labor data:
Temp staffing rolling over (grey area highlights last recession):
Job openings threatening to roll over:
Number of weekly year-over-year jumps in jobless claims most since '09: