Outlook Gap

Stand up in a clear blue morning
Until you see what can be
Alone in a cold day dawning
Are you still free?
Can you be?
--Steve Winwood

Interesting observation by Liz Ann Sonders. The 'outlook gap,' defined as the difference between CEO and consumer expectations about the economy (as measured by survey), finds executive views at record levels of 'depression' (pun not intended).

As of Q3, “Outlook Gap” from @DiMartinoBooth is widest on record...never have CEOs’ views on future been as depressed as they are relative to employees they lead (suggesting reversal in unemployment rate typically seen at cyclical inflection could be more violent) pic.twitter.com/X1L5HQGNFB

— Liz Ann Sonders (@LizAnnSonders) November 1, 2019

Note that the outlook gap is typically lowest prior to recessions. As such it can be a 'leading indicator' of sorts. It portends managerial activity to address their doubts about the future.

On the other hand, note that unemployment is often lowest just prior to a recession. Unemployment is a classic 'lagging indicator' w.r.t. economic activity. It reflects what has been rather than what will be.

The combination of the two, suggests Sonders, is cause for pause--particularly on the back of this morning's strong job report that continues to suggest unemployment near record lows.