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Thursday, October 13, 2016

A Recession in the Next Four Years?

by Calculated Risk on 10/13/2016 11:33:00 AM

The WSJ surveyed 59 "academic, business and financial economists" about the possibility of a recession in the next four years: Economists Believe a Recession Is Likely Within Next Four Years

The U.S. must face one of two scenarios: Either the next president will face a recession in office, or the U.S. will have the longest economic expansion in its history.

... Economists in The Wall Street Journal’s latest monthly survey of economists put the odds of the next downturn happening within the next four years at nearly 60%.

That is ... a recognition that throughout its history the American economy has never grown for more than a decade without a recession. Over the course of the next four years, something—whether exhaustion of the economy’s cyclical momentum, a policy mistake from the Federal Reserve or some outside shock—could knock the economy off course.

“We do not think expansions die of ‘old age’ but there’s more probability that a shock will hit the U.S. economy further out in the horizon,” said Lewis Alexander, chief U.S. economist at investment bank Nomura.
Four years seems like forever and  I usually only forecast out a year or a little more.

Looking back to 2005, I argued the housing bubble - and coming bust - would probably take the economy into recession. However it wasn't until January 2007 that I predicted a recession (and the recession started in December 2007).  

That was a pretty obvious reason for a recession, and it took almost two years after the housing bust started for the recession to materialize.  I don't currently see anything that will cause a recession.

I don't know about the odds in the next four years, but I doubt there will be a recession in 2017 (and 2018 seems unlikely too - but that is still a long time from now).