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>>> Economists still reluctant to call recession, but pessimism mounts as data backs away from peak


By Steve Goldstein

Dec 10, 2018


https://www.marketwatch.com/story/economic-commentary-grows-more-pessimistic-as-data-backs-away-from-peaks-2018-12-06?siteid=bigcharts&dist=bigcharts



‘Storm clouds are clearly forming,’ says one economist

It’s tough to make the argument that the economy isn’t doing well, with the unemployment rate at the lowest level in a generation and growth in the most recent quarter above 3%. But a host of indicators are now below their best levels of the cycle, and the talk from economists is increasingly negative.

One of the most bearish new pieces of commentary has come from Diane Swonk, with the chief economist of Grant Thornton moving up her recession forecast by six months to the first half of 2020.

“Storm clouds are clearly forming on the horizon,” she said in published commentary. “A strong dollar, weaker growth abroad, mounting corporate debt, a slowdown in housing, and the ongoing havoc that tariffs are wreaking on global supply chains are each taking a toll.”

Her comments stand out as economists are notoriously reluctant to forecast recessions.

But even among those who don’t use the R-word, the comments are getting more negative, coming at a time when financial markets also are growing more worried, with elements of the yield curve inverting and the stock market DJIA, -0.14% getting hammered this week. An inverted yield curve historically has been associated with a recession.

“As the boost from recent fiscal stimulus fades and the central bank’s monetary tightening begins to take hold, we forecast growth in the world’s biggest economy slipping back to 1.8% by 2020,” said S&P Chief Economist Beth Ann Bovino.

What is undeniable is that the U.S. economy is no longer running at its fastest rate of the cycle. See MarketWatch Economic Calendar.

Indicator Most recent Cycle peak (or low for jobless claims)

Jobless claims 231,000 202,000
Nonfarm employment* 155,000 351,000
Average hours worked per week 34.4 34.6
GDP 3.5% 5.1%
ISM manufacturing 59.3% 61.3%
ISM services 60.7% 61.6%
Philadelphia Fed manufacturing index 12.9 36.4
Existing home sales 5.22 million 5.72 million
New home sales 544,000 712,000
Vehicle sales 17.49 million 18.16 million
Consumer confidence 135.7 137.9

* - Cycle peak excludes the May 2010 reading which surged due to hiring for the 2010 Census

Latest: U.S. gains 155,000 jobs in November as unemployment rate matches generational low

The consensus estimate of the probability that real GDP will be shrinking in four quarters’ time is the highest since 2008, Goldman Sachs economists say, citing the Survey of Professional Forecasters conducted by the Philadelphia Fed.

That said, the economists aren’t predicting a recession next year. And the good news, Goldman Sachs finds, is that the predictive power declines longer than four quarters ahead.

“The ‘wisdom of crowds’ can be useful for predicting recessions, but primarily at relatively short horizons,” they say.

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