Is A Recession Coming?

Recent Economic Indicators Have Indicated A Slowing Economy

by Suresh Hanubal

News Co-Editor

Come this July the current economic expansion will be the longest recorded in modern American economic history. Our current expansionary period began in the aftermath of the 2007 – 2009 Great Recession and although it’s been slow growth economic growth wise in relation to  previous expansions, it has still delivered mild gains for the American Middle and Working classes; but with most gains going to the wealthiest Americans. Now, although expansions don’t die of old age, recent signs are signifying an economic slowdown in the near to mid-term.

Most recently, and worrying to many economists, the yield curve just inverted. Now what this basically means is that short-term rates on Treasury securities have moved above long-term rates for the first term since 2007. The Federal Reserve typically does this in order to forestall inflation and in anticipation for future slowing growth. Historically, with only one exception since the end of the second world war, this has meant that a recession will follow at some point within the next two years. However, as this economic cycle has bucked many historical patterns, this may be not the case this time. Notwithstanding, this is a worrying sign for the economy.

Other domestic economic imbalances have also come to light recently. In December 2018 the stock market fell precipitously, nearly entering a Bear Market. In addition, wage growth has flattened once again. Also, the economy has witnessed severe volatility due to the government shutdown and its resultant decline in government spending.

The bad economic news continues, as global economic growth has seemed to flatten within the last few months. Italy already entered a recession in the fourth quarter of 2019, and growth in the rest of Eurozone is expected to fall sharply as well. Specifically, economic growth in Germany, the economic powerhouse and center of the Eurozone, is expected to only about one percent for the year. Eurozone area growth overall is expected to be between one and two percent. In addition to the projected slowdown in Europe, growth in the worlds growth engine for the past decade, China, is expected to slow down significantly as well. This is at least partially a result of the recent rise of US-China trade tensions, but also due to domestic imbalances as well. Since the 2008 Global Recession, China has been able to sustain constant high growth due to a combination of targeted government subsidies and stimulus, but that program seems to be coming to an end.

However, although this news may seem dire at first, underlying economic indicators actually remain quite strong. As such, there does not seem any reason to really worry about the foundation of the economy and fear for a recession just yet. But with the amount of crazy things that have gone in the last few years, who really knows what will happen in the next year?

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