For over a year now, so many people have feared the “R” word coming for the economy that this hypothetical recession has likely become the most widely predicted in history. Why did a recession seem inevitable? It could have been the 10 back-to-back interest rate hikes since last March, or the subsequent drag on housing market activity, or the large-scale culling of jobs across sectors and an extended stock market rout in 2022 that left the economy, especially the tech sector, on edge. Or it could have been all of the above (plus inflation.) But now, a well-known economist says we don’t need to look on the horizon for a recession to come—it’s already here and we all missed it. We were looking in the wrong place, he says.

“Nobody talked about the release of real GDI today,” David Rosenberg, the founder of Rosenberg Research and formerly a chief economist on Wall Street for roughly two decades, at Gluskin Sheff and Merrill Lynch, wrote in a tweet Thursday, referring to the gross domestic income numbers that came out the same day.

Nobody talked about the release of real GDI today. It shrunk 2.3% SAAR in Q1 after a 3.3% Q4 contraction. Averaging it out with GDP, the economy has contracted for back-to-back quarters and in 4 of the past 5! The recession has arrived and nobody’s noticed. pic.twitter.com/uFm5TZnY9F

— David Rosenberg (@EconguyRosie) May 25, 2023

GDI dropped 2.3% in the first quarter of 2023, following a 3.3% decrease in the last three months of 2022. That’s the worst decline in two consecutive quarters since the COVID-19 pandemic began—and two consecutive quarters of decline is what economists call a “technical recession.”

When you consider gross domestic product, on the other hand, the economy expanded 1.3% in the first quarter of this year, staving off recession from that perspective. Together, GDI and GDP are considered key indicators of how the economy is doing, and Rosenberg argued that everybody was ignoring what a key data point was conveying.

“Averaging it (GDI) out with GDP, the economy has contracted for back-to-back quarters and in 4 of the past 5!” Rosenberg wrote. “The recession has arrived and nobody’s noticed.”

GDI and GDP are closely related ways of measuring almost the same thing, but not quite. GDI measures the income earned and costs incurred when producing all the sales of stuff in the economy that add up to GDP, but the latter is often considered a more reliable estimate, according to the Bureau of Economic Analysis. Pessimistic GDI data points to an easing pace of economic expansion as a result of high inflation despite persistent interest rate hikes and tighter availability of credit.

How bearish to be?

But how (or whether) the financial markets have factored in a possible recession is still up for debate. Strong data in the initial months of the year, including low unemployment rate, robust consumer spending, and slow, but positive GDP growth numbers, gave investors the hope that a recession, if it comes, would be mild.

Rosenberg, who has held a bearish view of the economy for months, highlighted the disconnect in how the financial markets were viewing recession. In a Thursday tweet, he pointed out that key industries in the S&P 500 index, such as transport and consumer discretionary, which are tied to the health of the economy, were trading at significantly lower levels. That is symptomatic of a downturn like many others in the past, including during the 2008 financial crisis, according to Rosenberg. The overall S&P 500 index is up 9.64% since the start of the year.

The Wall Street veteran was not entirely sold on the upbeat narrative even earlier this year. In February, he tweeted that the notion of a “no landing” scenario—where interest rate hikes would not spur a recession while the inflation rate remains high and the economy grows—was far from reality.

“The ‘no landing’ narrative is the biggest hoax Wall Street economists have peddled since ‘global decoupling’ in 2008,” Rosenberg tweeted, referring to an idea where business cycles of emerging and developed nations were increasingly diverging.

Rosenberg warned about a recession hitting the U.S. economy even earlier this year, saying that the S&P 500 index could fall as much as 30% by the time the Fed pauses interest rate hikes.

“The recession’s just starting,” Rosenberg told MarketWatch.

“The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle,” he said, pointing to a prolonged period of pain for the economy.

If other long-time gauges, like the price of copper, are to be believed, we may be closer to a recession now than investors realize.

“It’s the first physical evidence we’re seeing that demand is being impacted worse than expected in the West,” Natalie Scott-Gray, a base metals analyst at broker StoneX, told the Financial Times about copper prices. As one of the most widely consumed metals in the world across industries, copper trade reflects the appetite for demand.

Another indication of recession could be found in corporate earnings. Profits of S&P 500 companies have fallen an estimated average of 3.7% compared to the previous year, and even though the majority of the companies beat their earnings forecasts, it wasn’t as big a win as analysts had already lowered their guidance, Bloomberg reported.