It does seem like a recession is on in the US

NOBODY is happy about the US economy. You do not need to read the business sections to know that; the political section should make it amply obvious. But on Wall Street, at least, there had been a cosy belief that the economy was recovering, albeit with a shocking level of inequality, and that this could be counted on to continue. By the end of January, they were reconsidering. Last week, which brought a welter of data, has seen recession fears resurgent.

Bond markets show the depth of concern. Bond yields are sliding down, suggesting no great optimism for growth, implicit inflation forecasts from the bond market suggest the most deflationary outlook since the crisis, and the extra yield that "junk"-calibre companies must pay has risen to levels that suggest stress is coming. The extra yield available for buying longer bonds is falling, suggesting a belief in low growth and interest rates long into the future. The Fed Funds futures market, in which investors hedge against changes in rates, says it is roughly a 50-50 shot whether the Federal Reserve raises rates even once this year; the official guidance is for rate rises. Equities have fallen and boring defensive companies are best- ing the tech companies that recently dominated.

Gold has gained some 10 per cent in the last two months, showing fear that central banks no longer have control.

In all of this, Wall Street is in line with Main Street, which evidently also believes the economy to be in a bad way. Last week, three strands of data were important. First came supply manager surveys for manufacturing and services. The manufacturing survey has been a great leading indicator for growth in the economy as a whole, and it is holding at a level, below 50, that portends contraction.

It has been there for four months. Manufacturing is a dwindling share of US economy but the services measure, which had been holding up, also dipped last week.

Once the services data arrived, the dollar plunged against a range of other currencies, and is now back roughly where it was 10 months ago. It had rallied on the basis that there would be a disjunction in monetary policy, with the Federal Reserve tightening while everyone else loosened. As that conviction faded, the dollar receded. On financial conditions, the Federal Reserve published its quarterly survey of banks' senior loan officers, and found a growing majority of them planning to tighten their standards for lending to companies - a reliable harbinger of depression in the past.

And then came the employment data for January. US payrolls have increased steadily ever since the worst of the recession in 2009. Many were braced, after the worrying data of the last few weeks, for a big and unpleasant deceleration in that improvement. It did not quite happen. The official unemployment rate dropped from 5 to 4.9 per cent, its lowest since 2008, while 150,000 were added to payrolls.

This is evidence of deceleration, but hard to square with an imminent recession. Adding to the complexity, average hourly earnings rose by 2.5 per cent year-on-year, following a revised gain of 2.7 per cent last month. After years of terrible wage growth - another critical reason for the anger and disenchantment which is showing itself on the campaign trail - wage growth is now picking up.

This is good news and might begin to cheer the many disaffected Americans whose living standards have stagnated. But wages are now growing faster than the official Fed target of 2 per cent inflation. That means, despite the angst on display in the campaign, and the confident bets in the market that the Fed will have to desist from raising rates, further tightening from the Fed may well still be in order. As markets are no longer positioned for this, that would have a nasty effect on asset prices. How can the data showing a steady employment recovery be reconciled with the widespread perception of ongoing recession and mass unemployment.

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