Could the U.S. economy really avoid a recession in 2020?
Well, the answer, as of late December anyway, is yes.
The longest economic expansion in U.S. history, which kicked off in June 2009, apparently has more gas in the tank. It’s quite a change from last summer’s cloudy rumblings when some experts saw the the odds going up for the possibility of a recession by mid-2020.
“I expect that the U.S. economy will avoid a recession in 2020,” said Robert A. Dye, chief economist at Comerica Bank.
Look for modest growth next year. Dye is forecasting that the nation’s gross domestic product — the value of all goods and services produced in the U.S. — will increase at a seasonally adjusted annual rate of 1.9 percent in 2020. That’s cooling down from 2.3 percent in 2019.
Not written in stone
While the outlook is generally rosy now, the no-recession mantra is far from written in stone.
All it takes is one more big run-in with China. Or a shift toward rising interest rates to drive up the cost of bloated corporate debt enough to send another round of pink slips to America’s workforce.
And there’s all the political drama: President Donald Trump’s impeachment (Trump is not expected to be removed from office by the GOP-led Senate), as well as the 2020 Democratic presidential primary debates, primaries and caucuses.
“Consumer and business confidence may slip as negative campaigning increases through 2020,” Dye said.
“It is fair to say that the business community has concerns about either a Sanders or a Warren presidency,” Dye said, referring to Democratic candidates U.S. Sens. Bernie Sanders and Elizabeth Warren.
Slower growth, of course, means that the U.S. economy would be more vulnerable to any hiccups or outside shocks next year that might trigger a downturn.
Again, might.
Yet if a recession took place, Dye said, it’s more likely that it would be less damaging than the last recession, which ran from December 2007 to June 2009.
Slowdown ahead?
Most aren’t forecasting economic mayhem in 2020.
A no-recession forecast for 2020 was issued by University of Michigan economists, as well.
The forecast, produced by U-M’s Research Seminar in Quantitative Economics, noted that “economic growth has subsided after a sugar high of corporate tax cuts, investment incentives and lavish federal spending.”
As a result, the economy is likely to slow down next year but not come to a standstill. The U-M economists said: “Real GDP growth in 2019 promises to be middling.”
Among other things, the U-M forecast is calling for:
• Light vehicle sales to slow to 16.8 million cars and light trucks in 2020 and 16.7 million vehicles in 2021 — down from an expected 17 million units in 2019.
• The annual U.S. jobless rate to inch down further to 3.5 percent in 2020 and 3.4 percent in 2021 — down from 3.7 percent in 2019.
• Job gains to stay steady in the 130,000 to 140,000 per month range in 2020-21.
• Total housing starts to rise modestly to 1.26 million units in 2020 and 1.28 million units in 2021 — up from 1.25 million in 2019.
Next year, key signals to watch include jobs, consumer confidence, consumer spending and trade.
Next year if the U.S. jobless rate starts going up, consumers could become increasingly on edge. Kiplinger’s noted that if the jobless rate starts rising above 4 percent, we likely would be looking at the start of a recession.
