Economic expansion turns 10; don’t count on 11

WASHINGTON – Happy 10th birthday, U.S. economic expansion! Let’s hope you’ll be allowed to live a little while longer, despite a certain someone’s concerted efforts to kill you off.

The Great Recession officially ended – and the current recovery officially began – exactly a decade ago, in June 2009. That means we’ve now tied the record for the longest economic expansion on record, matching the 10-year business cycle upswing that ended in March 2001.

That’s quite an achievement, especially in light of the many policy missteps we’ve been subject to in the intervening years, including government shutdowns, trade wars and threats to central-bank independence. It speaks to the hardiness of the U.S. economy.

So while statistically speaking, we might be overdue for a downturn, the economic fundamentals appear pretty good. And recoveries don’t merely die of old age; they get murdered. A negative shock does them in, or a collective crisis in confidence.

Unfortunately, though, the temporary stimulus of the Republican tax cuts appears to be fading. And, meanwhile, a number of “softer” indicators suggest that the risks of a near-term slowdown, or even recession, are rising.

On Monday, for instance, two indexes measuring economic activity in the manufacturing sector were released. One, the Institute of Supply Management’s manufacturing index, dipped to its lowest level since 2016. Another, IHS Markit’s U.S. Manufacturing Purchasing Managers’ Index, reached its lowest level in nearly a decade.

Note that both manufacturing checkups were based on surveys conducted before Trump announced his idiotic tariffs on Mexican goods, which will cause even more trouble for U.S. manufacturers who rely on the unfettered flow of trade across our southern border.

The auto industry, which has already announced more layoffs in the first four months of this year than in any comparable period since 2009, is especially vulnerable, given how much of the sector’s supply chain straddles the U.S.Mexico border. Economists at Deutsche Bank estimated that if the president indeed ratchets tariffs on all Mexican goods all the way up to 25%, as he has threatened, the price of vehicles sold in the United States would rise by an average of about $1,300.

There’s also the Treasury yield curve, which shows interest rates for bonds at different maturity dates. Usually longer-term bonds have higher yields than shorter-term ones. But, for months, that hasn’t been the case: The yield curve has at least partially “inverted.” Historically, this inversion has preceded downturns. It signals that traders believe the economy is weak enough that the Fed will need to cut interest rates soon.

Likewise, the National Association for Business Economics’ most recent survey, released on Monday, also found that private sector economists put the odds of a recession starting by the end of 2020 at 60%. That’s nearly double the 35% odds respondents gave when surveyed in March. Like the latest manufacturing data, this survey was also conducted before Trump announced his Mexico tariffs, which suggests it actually may be understating economists’ present levels of pessimism.

Under normal circumstances, the idea that the Federal Reserve would contemplate cutting rates so soon after unemployment touched a half-century low would seem shocking. But Trump has been arguing for a while that the Fed should cut rates; he’s now ginning up enough fear about the future of the U.S. economy that he could get his wish.