A potential recession looms — and gloomy economic indicators show it may do maximum damage
There’s no great time for an economic downturn. But there are some timings that are worse than others, and it looks like the U.S. might be swinging toward recession at a time when it could do maximum damage.
On Sunday, Donald Trump tweeted that he had a 93 percent approval rating among Republicans, and retweeted a story that Republican leaders wanted to stay close to Trump to bask in his “economic miracle.” That 93 percent rating didn’t actually come from a poll of all Republicans. It came from a poll conducted at CPAC, a politics convention that draws only the most crazed conservatives. But it does show that the most right-wing of the right-wing is indeed wedded to Trump. However, it came from a poll conducted at the previous CPAC. So … maybe not so much today. And if the opinion piece Trump tweeted claimed that he was beloved because he hadn’t yet managed to screw up a decade worth of economic improvement … hold his Diet Coke. Because that may be coming to an end.
As reported by Bloomberg, a whole series of economic indicators have turned gloomy. And were’ not talking about the relation of the market to the winning team in the world series, or a connection between the housing rate and Punxsutawney Phil. These are the basic economic indicators that show which way the wind is blowing in the very near future.
Housing activity is down. Consumer confidence and consumer spending are both in retreat. The flattening of the Treasury yield curve indicates falling investor confidence. And it’s starting to look as if the sugar rush provided by the corporate tax giveaway has run out, leaving the U.S. to fall back into a decline that’s been roughing up economies from Europe to China. The 20,000 increase in February jobs was was about 200,000 below both what was predicted and what had come in the same month of the previous year. Now there are concerns that it wasn’t a fluke, but a leading indicator.
If recession hits, it’s sure to hit unevenly. During the past three decades, worker mobility has fallen sharply. Changes in hiring practices and wages that have lagged behind costs have brought on decreased worker mobility. Workers in economically sensitive industries are likely to be trapped, and those workers are less likely to have the eduction or the savings necessary to pick up and move to areas still enjoying relative economic health.
The misery that a recession would bring might be softened at least by the thought that it could rob Trump of his bragging rights and see him cast aside in a 2020 election. But … that might not be the case. Because many economists are predicting a recession in 2021. Trump might get to walk away, and leave someone else holding his ugly bag. Or worse still, Trump may be on hand to use the recession to justify even more “emergency” measures.
The Federal Reserve has been gradually raising rates, which is a move that can easily trigger an economic slowdown. But the Fed felt it had to make this move, since after years of essentially giving money way (actually, not “essentially” just … really giving money away) there was no margin for adjustment if either a recession or inflation started to be an issue. It’s hard to give the economy more gas when the throttle is already wide open.
With the Republicans gifting billionaires and corporations with trillions in reduced taxes and leaving everyone with the tab, the idea of pulling back on the gas just a little bit seemed like a good idea. And it probably was, but the truth is that the economy hasn’t just been in a long recovery, it’s been in a record long recovery. Some kind of adjustment was likely already due, and that’s been reflected around the world. But in the U.S., the one-time massive cash injection hid the basic facts and made growth appear to continue.
There is a possibility the economy could slow into a “soft landing” before it rallies again. That’s always the plan, but very seldom the reality. And Trump’s tariffs, which are acting as a drag on the economy, make that soft landing even less likely.
According to Bloomberg, “More than three-quarters of business economists expect the U.S. to enter a recession by the end of 2021.” That’s a sobering number. Even more so because it may be too late to do any good—and just late enough to justify providing some even more radical “relief” for the top 1 percent of the 1 percent on false claims that “it worked last time.”