Risk of U.S. recession moves higher
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.