Categories: Featured News

Report: Warning Signs Show U.S. Economy Close to Recession

A new report from Axios shows that there may be cracks starting to appear in the booming U.S. economy. The report explains that there are numerous warning signs that an economic slowdown could be ahead after nearly ten years of continuous economic growth in the United States.

Although a  jobs report issued Friday showed unemployment to be very low and job creation to be very high, all the economic news is not good. According to Axios, “visible threats suggest an all-out recession could come as soon as next year.”

Here are some key economic indicators showing that may be trouble ahead:

  • Sluggish worker productivity.
    • According to The Wall Street Journal, “the third quarter of 2018 marked the 32nd straight quarter of yearly growth below 2%, a long and consistent stretch of anemic growth that hasn’t happened before in the post-World War II era.”
  • The Journal also reported that there has been a slowdown in metal product manufacturing for the first time in two years.
    • This is usually an indicator of a slowdown in overall manufacturing activity.  Some people believe that this is happening because of President Trump’s new trade war with China, Canada and the European Union.
  • New investment by businesses is behind expectations.
    • Data shows that companies are using their $1.2 trillion tax cut for stock buybacks instead of on capital spending. This will increase stock prices and benefit shareholders, but it does not stimulate economic growth or create new jobs. According to Fedweek, this will be the the biggest-ever year of stock buybacks in American history, with total buybacks approaching the $1 trillion mark.
  • There is already a slowdown of U.S. economic growth.
    • In the third quarter, growth in the U.S. gross domestic product (GDP) slowed to 3.5%, down from 4.2% in the second quarter. Also, economists expect growth to fall to 2.9% in the fourth quarter and 2.5% in the first quarter of 2019.

What Happens Next?

The economic forecasts for what will happen next in the U.S. economy are very mixed. However, according to Axios, “recession is a common theme.”

Here are the opinions of some leading economists:

  • Megan Greene, chief economist at Manulife Asset Management, expects a recession in the next few years.
  • Mark Yusko, founder of hedge fund Morgan Creek Capital, forecasts a recession next year due to the trade war. He believes there is a “100% chance of a recession.”
    • “The trade rhetoric is one of the dumbest things in the history of all administrations and it will cause a global recession,” Yusko told a recent investment conference.

The U.S. Federal Reserve’s recent series of interest rate hikes has caused prices to increase, and economists believe this is a harbinger of a coming recession. The historically high federal deficit is also a factor.

  • According to Greene, the U.S. has experienced a significant recession 10 out of the last 13 times the Federal Reserve entered a rate-hiking cycle, which they are in now.
    • The Federal Reserve has also been saying that it will keep raising interest rates because they need to do so in order to keep inflation down.
    • Rising interest rates makes everything more expensive, and this is very bad news for corporations used to borrowing when interest rates were near zero.
  • The Journal also said that prices for “everything from rolled aluminum to cookies” are rising. This is inevitable after years of low inflation, but it may cause a difficult transition. “History is not on our side,” Greene said.

Axios said that experts forecasting a continuing economic slowdown over the next two years include the IMF, and Ben Bernanke and Janet Yellen, both former Federal Reserve chairmen.

People inside the Trump administration of course deny that a recession is imminent. They are still forecasting strong economic growth over the next several years. But the Trump administration does not have a good track record when it comes to telling the truth. And this may be just one more case where they are issuing misleading statements for political purposes.

A recession may in fact be on the horizon, and if it comes then all of the Republican lies will be exposed, and 2020 will be another election year where Americans decide they need a new political party in charge.

Leo Vidal

I am a lifelong Democrat with a passion for social justice and progressive issues. I have degrees in writing, economics and law from the University of Iowa.

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