See Global Recession Alarms Aren’t Ringing, Despite Market Mayhem: Plenty could still go wrong for the global economy in 2019, but the economic data aren’t saying it has happened yet
from Dec. 10 by Paul Hannon of The WSJ. Excerpts:
Securities examined 120 recessions in 40 different countries over
the past 40 years for clues about how economies behave before recession
sets in, for example, what happens to consumer spending, home prices,
bank lending, imports, productivity and employment.
“We find that on several dimensions, the behaviour of the data over
the last four quarters in the U.S., Eurozone and Japan is completely
incongruous with any of the recessions that took place since 1980,”
write Pierre Lafourcade and Arend Kapteyn of UBS.
Mr. Kapteyn, in an interview, said the model is consistent with
a “sharp slowdown” in global growth, but not the end of the business
Productivity growth and consumer spending, for example, tend to slow
before downturns set in. In the U.S., they’ve picked up. U.S. consumer
spending, for example, was up 2.9% in October from a year earlier,
adjusted for inflation. That’s better than the average of 2.4% over the
past four years. Growth in worker productivity in the second and third
quarters was among the best of the expansion."
have drawn similar conclusions about the growth outlook. They
built several alarm systems for impending recessions—one using only high
frequency economic data and another including economic data and
financial market behavior. The U.S. indicator using only economic data
puts a 21% probability on a downturn in the next 12 months, up a bit in
recent months but still below levels reached in 2016. The indicator that
uses financial market behavior, such as stock price changes and changes
in long-term Treasury bond yields, puts the probability at a much
Some economic indicators that presage downturns, such as the change in
corporate profit margins, have improved this year rather than
deteriorated, said Bruce Kasman, J.P. Morgan’s chief economist.
“We’re in a slowing, there’s no doubt about it, but it doesn’t feel like
something fundamentally is breaking down in the underpinnings of the
expansion,” Mr. Kasman said in an interview."
See also Recession Is Looming, or Not. Here’s How to Know: Early indicators signal concerns, though more credible ones still look good. But the economy can turn quickly
from Dec. 27 by Justin Lahart of The WSJ. Excerpts:
"The early indicators of trouble, such as stock-market selloffs and
surveys of sentiment, are imperfect forecasters of a recession."
"Early indicators have more credibility when several of them are flashing warning lights, which is true now.
Besides the stock-market turmoil, short-term Treasury yields are almost as high as long-term yields, closing in on a yield curve “inversion” that in the past has portended recession.
Corporate bond yield spreads over comparable Treasurys are
climbing. Business sentiment is slipping, with nearly half of chief
financial officers in a recent Duke University survey forecasting a recession by the end of next year."
"The flattening yield curve, for example, could be a result of bond buying by central banks.
But these indicators tend to reinforce one another"
"initial jobless claims, auto sales, industrial production and aggregate hours worked.
Of these, only auto sales, which have leveled off lately, provide any concern."
"Economists as a group may never correctly predict a recession, but the
odds they place on one coming tend to rise in advance of a downturn."
"This month, economists surveyed
by The Wall Street Journal put a 22% chance of a recession occurring
over the next 12 months, compared with 14% a year earlier. Those odds
would need to go higher before they amounted to a danger sign."
"Before the fall of 2007, recession indicators like jobless claims
suggested nothing was seriously amiss, and then suddenly, they did."
See Inverted Yield Curve
Inverted Yield Curve
i'm not sure anyone can predict a recession. I think there are many indicators that can help with such things, but still we are guessing for the most part. I think we learned a lot of lessons from the Great Recession. There may not be a recession for years to come. I would not be surprised if we couldn't make it another 5 years without a recession. Some people seem to think student loans will be the leading cause of the next recession. I think even those with student loans that happen to be gainfully employed will prevent such a thing from happening. There are many that give up on college, but i don't think those are the people that will drive us into a recession. With regulation in place we may be able to make it a decade and a half without a recession, but of course i will need more data to prove this theory as i'm mostly speaking on a whim.
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