Economists say recession not likely, but uncertainty remains

Predicting the ups and downs of the economy is a lot like precisely forecasting the weather or charting the possible path of a hurricane. Economic conditions can change quickly and are dependent on myriad domestic and global factors.

That was one of the main takeaways from a presentation Thursday by economists from the Federal Reserve Bank in St. Louis on the Southeast Missouri State University campus.

Their presentation on the national and regional economic outlook was one of several presented at the inaugural Southeast Entrepreneurship and Economic Development Symposium (SEEDS) sponsored by the university’s Harrison College of Business and Computing.

“We live in a Twitter- and media-saturated world and its very easy to get lost in the trees,” commented Kevin Kliesen, business economist and research officer with the Federal Reserve Bank in St. Louis. Kliesen said he and other economists follow dozens of leading indicators on a quarterly, monthly, weekly and sometimes daily basis in an effort to forecast where the economy is headed.

“I think we’ll probably see modest growth in the economy during the second half of the year, something around 2% seems reasonable to me,” he said. “We might see a modest reduction in job growth, but I think that’s more of a function of structural factors in the labor market. Also, inflation doesn’t look to be too much of a problem at this time, and we think it’s going to continue to be contained.”

Kliesen said there’s a long list of factors affecting the economy, ranging from consumer confidence and manufacturing output to trade disputes with China and unrest in the Middle East.

Kliesen told his audience of students, faculty members and area business people there are almost as many forecasts as there are forecasting models.

“One model shows a 36% probability of being in a recession by this time next year, another shows about a 10% chance,” he said, adding a model produced by the Federal Reserve Bank in St. Louis shows only a 1% probability of an economic recession in the short term.

“So there’s a lot of conflicting data out there, some indicators suggesting high levels of recession going forward, others suggesting a very low probability, but current data is suggesting a very, very small, probably 0% probability, that we’re in a recession at this time,” he said.

While Kliesen spoke on the subject of the national economy, another economist from the Federal Reserve Bank in St. Louis, Charles Gascon, focused on the economic state of the Cape Girardeau area compared to other regions of Missouri and the surrounding region. He pointed out the average annual economic growth rate between 2011 and 2018 for Cape Girardeau compared to other areas.

“Cape Girardeau, from a regional standpoint, is doing pretty well with a 2.2% average annual economic growth rate,” he said. Meanwhile, he said the growth rate in St. Louis has averaged 0.8%, “which is about a third of the national average, while Memphis was even lower than that at 0.3%.”

Gascon, who describes himself as a “regional economist,” said “some counties in southeastern Missouri have had significant contractions in economic activity as manufacturing plants have closed in these areas and their share of output has declined.” Those declines, he said, have mirrored population declines in those counties as well.

Gascon pointed out that two of Cape Girardeau’s largest workforce sectors — health care/social assistance and retail trade — are typically well insulated from economic booms and busts on the national level.

“When we look at some of the sectors that are prominent in this region, like retail trade and health care and social assistance, these are not that sensitive to the overall cycles in the U.S. economy and that’s where the bulk of employment is in this region.”

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