Inspired, or worried, by the stock market there is more and more talk of a recession in 2019.
To look past the usual comment that the stock market predicted nine of the last five recessions, a short list of positive and negative signals:
Why There Won’t be an Early Recession
- Economy has momentum, growing faster than its potential now
- Employment, wages rising; unemployment rate low
- Consumer debt levels and defaults not a problem
- Consumer spending increasing
- Interest rates and inflation are low
Why There Will be an Early Recession
- China, European economic growth slowing
- Sales of New and existing homes falling
- Turmoil in Washington
- Fed is tightening
- Business facing tighter credit
Economic expansions don’t die of old age. Changing economic conditions lead investors, consumers and business to cut spending, hunker down and hoard cash. What conditions? Sharply higher interest rates, bankruptcies and defaults, collapsing economies in other countries or large natural disasters. The second list isn’t that grim.
What can one conclude? The economy in 2019 is likely to grow more slowly and not feel as good as in 2017 or 2018. Secondly, if the negative factors don’t vanish or shrink a lot, there will be a recession, though it is not clear when.