Some believe the recession will begin in the year 2020. But does anybody really know?
An FKD Feature exclusive

The Wall Street Journal surveyed major economists about their predictions for the date of America’s next recession. Most economists believe that before the current expansion will spiral into a recession, it will set records for an amazing longevity. The expansion began in 2009, and, since then, the economic expansion has ranked as second to only one unbelievably long period of expansion in American history. The expansion, according to most of the forecasters surveyed by WSJ, will probably begin to decline by the year 2020.

Recessions, and U.S. history with them

First off, a recession is defined by The Oxford Dictionary as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters,” and America has had its fair share of these recessions. In fact, there have been as many as 47 recessions in the United States’ history! Most recently, The Great Recession, the parameters of which extended between 2007 and 2009, was actuated by the collapse of the housing bubble and an accompanying profound mortgage crisis. Operating in a domino-effect manner, the U.S. helplessly witnessed the dilapidation of the automobile industry, as well as many of the largest financial institutions in the country. And as has been customary ever since the economist field gained traction, predictions have often been lodged as to when precisely these recessions will arrive, disappear, intensify or loosen their grips. But it is sometimes (read: usually) quite hard to tell.

The Federal Reserve in 2018

Many predict that the Federal Reserve will ease interest rates soon enough with the intention of cooling off an “overheating economy,” and thus bringing the expansion to a plateau. In fact, almost 60 percent of economists surveyed predicted that the expansion would begin to slow by 2020, while another 22 percent put it closer to 2021 (I imagine, sort of like the dude that estimates something costs one dollar more than the last guy estimated on a game show just to be a jerk.) Some went so far as 2022. But does anybody really know? Or are these estimations arbitrary and taken from thin air?

Why are they saying this?

These esteemed predictors of the nation’s fate are saying, well, 62 percent are saying, that the economic downturn will be actuated by an overheating economy and the subsequent Federal Reserve’s tightening of belts. But a minority feel that the cause will be a financial crisis, the bursting of an asset bubble, a fiscal crisis or certain disruptions to international trade.

Can anybody know for sure, though?

Due to the fact that recessions are notoriously difficult to predict, and sometimes are tricky to recognize even after they start, none of these economists know for sure. At best, these are educated guesses, and, at worst, it is toddlers guessing at how many stars are in the sky. For instance, in December of 2007, the National Bureau of Economic Research analyzed data, and then came to realize that The United States had been amidst a recession for over a year at that point. On the flip side of the coin: Forecasters saw the chances of a recession rise back in 2011 and in 2016, and both turned out to be false alarms!

“Recessions occur because of unforeseen shocks, so by definition, there is no meaningful answer,” said Deloitte economist Daniel Bachman, who declined to estimate either the timing or cause of the next downturn.

“Any year from 2019 onward is in play,” said Lou Crandall, chief economist at Wrightson ICAP.

May marks the 107th month of the current expansion, surpassing the 106-month expansion of the 1960s, and forecasters have become increasingly confident that the current expansion will set a longevity record by extending into the second half of 2019.

The GDP is growing still

Economists predict that in the fourth quarter of 2018, the gross domestic product will expand by 2.9 percent. This is up from 2.6 percent growth in 2017. Meanwhile, unemployment is at a record low, and the average risk of a recession in the next 12 months is pegged at 15 percent (based on who-knows-what. But that’s the datum). But, still, economists fear for things such as U.S. trade policy, while 60 percent felt that “growth would undershoot expectations rather than overshoot over the next year.”

Takeaway

On the brighter side of things, 71 percent of economists surveyed by the WSJ said that “they saw a greater chance that productivity growth would exceed forecasts, rather than disappoint.” Corporate and other tax cuts seem to play a supporting role in this productivity growth element of the economy. While not being the sole explanation, most experts agree that it is helping things along. Only 5 percent, however, cited the tax changes as the main cause of economic expansion. So, some good things, some bad, some predictions. And some too wary to cast a ballot on the topic. At the end of the day, we can only wait to see what the economy has in store for good ol’ US of A vis-à-vis recession or further expansion.

 

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Posted 06.06.2018 - 09:00 am EDT