Acknowledging that talk of a coming recession has mushroomed recently, one economics expert writing in The New York Times attempted to assuage those fears by noting that the American economic system is far more resilient than the fear-mongerers would have others believe.
Neil Irwin, a senior economics correspondent for The Upshot, starts his explanation by noting, “In August, consumer sentiment suffered its biggest drop since 2012, and Google searches for the term ‘recession’ surged to their highest levels in more than a decade.” But after pointing out that business activity has slowed and American manufacturing began shrinking in August for the first time in three years, Irwin turns positive, opining that an outright recession seems unlikely and a period of sluggish growth looks more probable.
Irwin bases this rosier outlook on various factors:
- The sectors affected by trade wars and a diminution of global manufacturing only represent a “relatively small share of the economy.”
- There is little sign of reduced consumer spending, and consumer spending comprises over two-thirds of the American economy; business investment represents 14%;
- The Federal Reserve has embraced easier money policies since the beginning of 2018, and that kind of shift usually evidences itself in delayed fashion, so it hasn’t been factored in yet;
- The unemployment rate has stayed at 4% or lower for over a year, which may very well trigger employers to think more long-term and not panic and opt for actions that would inhibit longer-term growth;
- Despite the fact that business investment seems to be slowing, there are numerous instances in which business investment slowed but consumer spending still grew. Irwin names a few instances, including mid-2015 to mid-2016 and the period after the dot-com crash in 2000 and 2001;
- The impact of the trade war has most profoundly affected manufacturing and commodity-related industries; Irwin notes, “As of August, only 8.5 percent of American jobs were in manufacturing.”
- The American economy has shifted toward a more service-based economy, leaving it less vulnerable;
- A Wall Street Journal survey of economists found only roughly one-third think a recession is forthcoming.
Irwin concludes, “There are a lot of risks out there, and it makes sense for C.E.O.s and ordinary consumers to be wary of what the future could hold. But for now, a gloomy economic future remains a far-from-certain possibility.”
The Washington Post, in an article titled, “How A Recession Could Doom Trump’s 2020 Reelection,” noted that only one president since the Civil War won reelection when a recession hit in the last two years of his first term: William McKinley in 1900. The Post added, “Since then, all four presidents running for reelection who had such a recession lost: William Taft, Herbert Hoover, Jimmy Carter and George H.W. Bush. Over the same span, all 10 who have sought reelection without such a recession have won: Woodrow Wilson, Franklin D. Roosevelt (3x), Dwight D. Eisenhower, Richard M. Nixon, Ronald Reagan, Bill Clinton, George W. Bush and Barack Obama.”