2019 recession looking likely, Duke survey says

DURHAM, N.C. — An economic downturn is looking more likely in 2019, according to a global survey of chief financial officers.

Nearly half of the executives surveyed in the Duke University Fuqua School of Business quarterly survey now believe that the U.S. will enter a recession by the end of next year.

Even more — 82 percent — think that a recession will happen by the end of 2020.

The negative sentiment comes after nearly a decade of growth and generational lows in unemployment. But there have been some warning signs on the horizon, said John Graham, a finance professor at the Fuqua School of Business.

“There have certainly been (negative) things happening,” said Graham, noting the trade war between the U.S. and China as well as slowdowns in European economies, “but somehow the U.S. economy has been going like a steam engine.”

The survey was of 500 chief financial officers, including 226 in the United States.

One of the biggest concerns beyond economic uncertainty, according those surveyed, is how difficult it has become to hire new employees with the unemployment rate at 3.7 percent — its lowest level since 1969.

“Right now it has become hard to hire people with skills, and you can’t keep expanding without the employees there,” Graham said. “We have reached full employment, and that is a great thing for many people that didn’t have a job two years ago and now have jobs.”

But, when you reach the limits of full employment, it puts a ceiling on growth, Graham said.

The executives aren’t predicting layoffs, however, just hiring at a slower pace. They think that if there is a recession it shouldn’t be a severe one.

Mark Vitner, a senior economist at Wells Fargo in Charlotte, N.C., said that the chances of a recession have indeed crept up, though he does not think the survey is too worrisome.

He predicts growth next year between 2 and 2.5 percent — and if a trade resolution is made with China, for example, the negative narrative could change.

“I would put (the odds of a recession) closer to 30 percent, and I would widen the window to 18 months,” Vitner said.

Vitner isn’t the only economist with concerns. At a roundtable of chief executive officers in Charlotte this week, Diane Swonk, chief economist at the consulting firm Grant Thornton, predicted a downturn next year, citing an aging labor market.

“If immigration continues to slow,” Swonk said, according to the Observer newspaper, “we will have a contraction in the labor force by 2020 because retiring Baby Boomers (are) not being replaced by enough incoming workers.”

“In the U.S., things are slowing after two very strong quarters,” Vitner said. “What concerns me the most going into 2019 is cyclical things like housing, motor vehicle sales, capital spending for equipment and commercial construction are slowing down.”

Zachery Eanes is a Raleigh (N.C.) New & Observer writer.