Friday, May 31, 2019

Still Not on Recession Watch

by Calculated Risk on 5/31/2019 02:47:00 PM

Several readers have asked me if I'm on "recession watch".

The answer is no.

First, a slow growth economy is not a recession.  Since the Great Recession ended in 2009, we've seen several mini-slowdowns and even a few random quarters of negative GDP growth (but employment and other indicators stayed positive).

Second, the tariffs on goods from China should not have a huge negative impact on U.S. GDP, however the announced tariffs on goods from Mexico appear more significant.   I'm relying on the analysis of others to estimate the size of the negative impact, but it doesn't appear large enough to drag the economy into recession.   This could have a significant impact on the auto industry.

A key positive is that lower mortgage rates, and solid employment growth should be supportive of housing.

Note: In my ten questions for 2019, I listed trade wars as a key downside risk (along with other administration policies).