SEMO economics professor agrees recession likely, difficult to say when

A growing number of business economists believe the United States will slip into an economic recession in the next couple of years, but an economics professor at Southeast Missouri State University says it’s difficult to forecast exactly when it will start.

“If I knew, I’d be rich,” said David Yaskewich, chairman of the Department of Accounting, Economics and Finance in the university’s Harrison College of Business and Computing.

According to a survey released earlier this week by the National Association for Business Economics, 74% of survey respondents said they believe a slowing economy will lead to a recession by the end of 2021. Of the 226 economists who responded to the NABE survey between July 14 and Aug. 1, 2% said they expect a recession to begin this year, 38% think it will occur in 2020, while 34% believe the recession will start in 2021. That’s up from 25% in a survey taken in February.

“With the slower growth rates that we are beginning to see and that are forecast for the next year, I think the economy is more vulnerable to a recession, so I would agree with that survey of economists,” Yaskewich said. “But pinpointing the date or quarter of the next recession is something that’s a lot more difficult.”

President Donald Trump has downplayed concerns about a recession, offering an optimistic economic outlook even after last week’s steep drop in the financial markets when the Dow Jones Industrial Average fell 800 points Aug. 14, its biggest one-day fall in 2019.

Indeed, the economy has been robust over the past couple of years, Yaskewich said.

“Right now, if we were to describe the economy it would be described as strong,” he said, noting unemployment numbers are near a 50-year low and “the job market and incomes are both somewhat strong.”

Consumer confidence also appears to be relatively high. U.S. retail sales figures for July, released last Thursday, showed the biggest jump in four months.

However, Yaskewich pointed to some troubling signs on the horizon.

“The forecasts for growth in the next year are somewhat slower than they were the previous year, so slower growth is one concern in assessing if a recession is likely or not,” he noted.

Many economists say recessions are “cyclical” and typically happen every six to 10 years.

“I would agree that there is a cyclical component,” Yaskewich said. “The last recession technically ended in June 2009, so we’re beyond 10 years since the last one and the longest period of uninterrupted economic growth we’ve had since our government started tracking the numbers.”

In addition to employment statistics, economists track several other indicators to predict the likelihood of a recession. Among them are wage growth, consumer spending and business investments.

“What an economist would expect to see (prior to a recession) are higher wages among workers or higher input costs, higher costs of production and higher interest rates,” Yaskewich said. “As factors of production become more expensive during good economic periods, that starts to cause some slowdown in economic activity.”

Yaskewich said a recession is sometimes thought of as a period of economic adjustment.

“If there is a period when employers shed workers that are not needed or if businesses cut back on expenditures on capital that is not needed, certainly the slowdown could be a move toward efficiency,” he said. “Recessions aren’t necessarily a sign of inefficiency; it could be a correction toward more efficient behaviors if firms are spending too much on capital or employing too many workers.”

Economists have expressed concern Trump’s tariffs and higher budget deficits could eventually dampen the economy. The Trump administration has imposed tariffs on goods from many key U.S. trading partners, from China and Europe to Mexico and Canada. Administration officials maintain the tariffs — which are taxes on imports — will help the administration gain more favorable trade terms. U.S. trading partners, however, have simply retaliated with tariffs of their own.

“Tariffs and a trade war would certainly be something that would be an alarm,” Yaskewich said. “Any policies that would make items more expensive for consumers or businesses would certainly contribute to a recession.”

Can an economic downturn be averted?

“I doubt it’s possible to completely avoid recessions,” Yaskewich said. “Even if the Federal Reserve were to lower interest rates, there’s not much room to lower them at this point, and even if Congress were to lower taxes or spend more (to stimulate the economy), they’re certainly limited because it would certainly contribute to a higher deficit.”

The Associated Press contributed to this story.

Do you crave business news? Check out B Magazine, and the B Magazine email newsletter. Check it out at www.semissourian.com/newsletters to find out more.