Warning signs may point to a looming recession as shutdown continues

(NewsNation) — The United States could be headed for a recession, as economists point to key unofficial indicators amid the government shutdown.

In early October, Moody’s Analytics chief economist told Fortune magazine that the economies of 22 states are contracting and that many lower- and middle-income households are “hanging on by their fingertips.”

One of the clearest indicators of an economic slowdown has been an increase in overdue car payments. Nearly 6.5% of subprime borrowers — those with credit scores below 670 — are at least 60 days late on their car loans, Fitch Ratings reports, nearly double the rate seen in 2021. Cars are being repossessed at the highest rate since the Great Recession of 2008 and 2009, according to CNN.

At the same time, pawn shop operators are reporting a boom in lending. FirstCash, the largest pawn company in the country, said same-store pawn loans at the end of June were up 13% from a year earlier. EZCORP, which operates hundreds of pawn stores across the U.S., said outstanding loans rose 11% last quarter, to more than $291 million.

GoFundMe’s CEO has said there has been an increase in users launching campaigns to help pay for essentials, such as a car payment or groceries.

Typically, these unofficial indicators and warnings of an economic downturn are paired with government economic data to gauge how close — or far — we are to a downturn. But because of the government shutdown, which has now stretched to a month, there is no federal data to provide that guidance.

Analysts note that a tech bubble is helping pad the markets. Tech companies, as well as many in other sectors, are attempting to integrate their products or services with artificial intelligence. Those moves are bringing in more investors — and drawing lofty valuations for these stocks. However, some are concerned the bubble could burst.

“It’s like the internet bubble, where in the end something very profound happened. The world was very different,” Microsoft co-founder Bill Gates said. “Some companies succeeded, but a lot of the companies were kind of, 'me too,' fell behind, burning capital companies. Absolutely, there are a ton of these investments that will be dead ends."

In such a "dead end," the bubble pops and the stock market faces a “correction” at best, or a crash at worst. That's why financial analysts warn the stock market is not always a good indicator of overall economic health.