Risk of U.S. re­ces­sion moves higher

Financial Mirror (Cyprus) - - FRONT PAGE -

A few notes from the econ­omy and an­a­lysts who track Amer­i­can GDP trends. More and more are sig­nalling a re­ces­sion, or, at least a com­plete flat­ten­ing of ac­tiv­ity

The CEO Round­table, the largest group of mega­cap CEOs is­sues its quar­ter sen­ti­ment poll. What had been, last quar­ter, a hope­ful state­ment from the group has turned down­ward: “The Busi­ness Round­table CEO Eco­nomic Out­look In­dex — a com­pos­ite of CEO pro­jec­tions for sales and plans for cap­i­tal spend­ing and hir­ing over the next six months — de­clined by 3.9 points, from 73.5 in the se­cond quar­ter to 69.6 in the third quar­ter. The In­dex re­mains be­low its his­tor­i­cal av­er­age of 79.6. It re­mains well above 50, in­di­cat­ing con­tin­ued eco­nomic ex­pan­sion — although well be­low the full po­ten­tial of U.S. eco­nomic growth.”

Ac­cord­ing to the Busi­ness Round­table third quar­ter 2016 CEO Eco­nomic Out­look Sur­vey, CEO ex­pec­ta­tions for sales over the next six months de­clined by 9.3 points, while ex­pec­ta­tions for hir­ing de­clined by 3.4 points from last quar­ter. CEO plans for cap­i­tal ex­pen­di­tures ticked up slightly by 0.8 point rel­a­tive to last quar­ter.

If job cre­ation stalls, the pri­mary en­gine of the U.S. econ­omy will have moved from net monthly ad­di­tions to lit­tle in­crease or neg­a­tive fig­ures. And, there is al­ready deep trou­ble among some groups:

As Mar­ketWatch pointed out, “the Great Re­ces­sion has ended for skilled labour, es­pe­cially those with four-year col­lege de­grees. But for many men with less ed­u­ca­tion the hard times per­sist.”

That’s one of the ar­gu­ments put forth by Erik Hurst in Econ Fo­cus, the most re­cent is­sue of the Richmond Fed­eral Re­serve’s quar­terly mag­a­zine.

Hurst, an economist at the Univer­sity of Chicago’s Booth School of Busi­ness, said big changes in the U.S. econ­omy have left mil­lions of men stranded. Those lack­ing high school de­grees fare the worst.

The Wall Street Jour­nal re­ported that the elec­tion could be the cat­a­lyst.

“Kevin Has­sett and Joseph Sul­li­van re­cently doc­u­mented that the U.S. en­ters re­ces­sions about twice as fre­quently in the year af­ter a pres­i­den­tial elec­tion com­pared with all other years. Five of the last 11 re­ces­sions landed in that win­dow. The Na­tional Bu­reau of Eco­nomic Re­search has es­ti­mated re­ces­sion dates back to 1854. In that pe­riod, 41% of re­ces­sions have fallen in the time win­dow that only com­prises 25% of months (the year af­ter an elec­tion, of course, comes every fourth year).”

And, fi­nally, the de­bate has heated up over whether Brexit will cause re­ces­sions in both the EU and U.K. If this hap­pens, the two are such mas­sive trad­ing part­ners with the U.S. that the trou­ble would at least rip­ple no swell across the At­lantic

The In­de­pen­dent wrote: “The Bri­tish Cham­bers of Com­merce (BCC) warned mount­ing po­lit­i­cal and eco­nomic un­cer­tainty is likely to hit in­vest­ment at the same time as con­sumer spend­ing be­ing “sti­fled”, com­bin­ing “to put a brake on in­vest­ment”.

The group re­fused to call a re­ces­sion im­mi­nent, but “a brake on in­vest­ment” can hardly be a good thing. Of course, ab­sent an eco­nom­i­cally ro­bust Europe, the U.S. can al­ways count on Ja­pan’s econ­omy.

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