Is the U.S. economy flashing a red light? "Walmart's recession indicator" soars to its highest level since 2008

Ask AI · Why Can the Walmart Recession Indicator Provide Early Warnings of Economic Risks?

Cailian Press, March 21 (Editor Liu Rui) As the Middle East conflict intensifies, U.S. domestic gasoline prices continue to soar, and the cost of living for low- and middle-income families in the U.S. is becoming increasingly high.

Against this backdrop, the U.S. economy may be facing an increasingly serious recession risk — at least one indicator tracked by veteran strategist Jim Paulsen has already sounded the alarm.

“Walmart Recession Signal” Sends Warning

Paulsen is a seasoned economist and former chief investment strategist at Leuthold Group. He tracks the “Walmart Recession Signal” (WRS), which measures the comparison between this retail giant’s stock price (up 10.9% so far this year) and the S&P Global Luxury Index (down 14.8% so far this year).

The basic idea behind this indicator is that if the WRS index rises sharply, it may signal an economic recession or slowdown — historically, before the last four U.S. recessions, this index all saw significant increases.

The logic behind this is also easy to understand: as the economy slows down, more consumers shift from luxury stores to discount retailers like Walmart.

Currently, the WRS index is approaching its record high, and the last time it reached this level was during the 2008-2009 financial crisis.

Paulsen warned in his report:

“The WRS index is increasingly warning people to be cautious about the U.S. economy because consumers’ shopping behavior is shifting more toward discount stores, indicating that low- and middle-income consumers may be under pressure.”

U.S. Economy Is Showing Significant Signs of Slowdown

Paulsen believes that the recent rise in WRS indicates that economic pressure “is beginning to increase from the lower end of income distribution,” and may “foreshadow worsening issues in the private credit market.”

Regarding the labor market, Paulsen emphasized that in the late 1990s, the WRS “rised sharply long before unemployment rates finally surged.” Therefore, the risk of recession may not be immediately reflected in unemployment data.

“My guess is that the U.S. economy can avoid a recession this year, but I am increasingly convinced that the economy is slowing significantly, and ultimately more economic policy support and lower interest rates will be needed to contain it,” he warned.

(Cailian Press, Liu Rui)