Should We Expect a Recession Soon?
September 26, 2019
Are we looking at a recession within the next year? The short answer is probably not, the long answer is much more complex. However, that is not to say that we are completely immune from such a reality.
Our economy is not built upon any physical value but rather upon the basis of trust. That being said words and opinions have the power to shake our economy to its core. So if it were common belief that we would soon be entering a recession then we would inevitably enter a recession. That, of course, is not historically how our modern recessions have started they are spawned as either from riskier practices or as part of the natural business cycle.
So why might we ask the question, “can we expect a recession in the next year.” Well, firstly our last recession was a decade ago which isn’t an indicator of a potential recession but still worries your average consumer. Secondly, the inversion of the bond yield curve (short term investments becoming more valuable than long term investments) about a month ago, which lead to an 800 point drop, “Typically these inversions occur 12 to 18 months before a recession” (Andrew Aran). While one might think a recession is almost certain to occur within that time it is only an indicator and one of a myriad of factors that could potentially predict a recession. For instance, consumer spending and confidence, as well as employment are still high, both strong indicators of a healthy economy. Regardless, that can change as the global economy slows, job growth is slowing which may lead to a rise in unemployment. If the US enters a prolonged trade war with China this may further slow our economy and increase our chance of a recession. Another positive sign is the lack of an unhealthy growth period like the housing boom before the great recession.
Sources
https://www.cnn.com/2019/09/23/perspectives/american-economy-recession/index.html
https://fortune.com/2019/09/21/is-recession-coming-2019-2020-or-is-it-hype/