Our live analysis has ended. Scroll through the posts below to see CNN reporters’ answers to readers’ questions, and read more about how to tell if a recession is coming here.
Recessions don’t just come out of nowhere. And we don’t know if, or when, a recession will hit the United States.
Some major external event needs to happen to trigger one into happening. The Iraq invasion into Kuwait creating an oil shock in the 1990s or the dotcom bubble burst.
But there are flashing warning signs across the globe, and the behavior of US bond markets has signaled an economic downturn may be coming sooner rather than later.One big concern: there are currently nine major countries on the verge of a recession.
For example, economic growth in Germany shrank last quarter – technically only a contraction, not yet a recession. China also delivered disappointing economic news, raising fears that their slowdown could also tip the US into a recession.
The economic slowdown in China and President Trump’s trade war have created a lot of uncertainty around the globe, and that means businesses are waiting on the sidelines instead of moving ahead with investment.
But the US economy has been doing well, and grew in the last quarter. Job growth has been steady, and unemployment is at a historic low. And the stock market is at a record high, suggesting some degree of investor optimism. So one big concern is whether bad signs overseas will frighten US consumers and businesses into holding off on big moves that will in turn slow the US economy down.
The last recession was especially severe, and there’s no reason to think that a similar financial crisis is looming this time around.
But there’s no way to predict the severity of a possible recession accurately. One metric to examine is the length of previous and recent recessions, which has ranged from six months and a year and a half.
The President suggested that we might have one last for two months. If history is a guide, a recession that short doesn’t seem likely.
It’s gonna take awhile for American farmers, and US businesses that have been affected by the trade war with China, to get back on their feet again.
Deere, the agricultural company, reported earnings and sales that missed Wall Street forecasts last Friday. Revenue, overall, fell 3% from a year ago. The company’s CEO, Samuel Allen, said the company’s results “reflected the high degree of uncertainty that continues to overshadow the agricultural sector.”
The Trump administration has been pouring billions of dollars to farmers hurt by the trade war. It’s expected to begin paying $14.5 billion by the end of August, the second round of aid that the Trump administration has rolled to farmers, who grow soybeans, corn and wheat.
Those farmers have been battling tariffs from China for nearly a year now. Those levies wind up make American farm products more expensive for Chinese importers, and private buyers have mostly stopped buying American-grown soybeans or wheat. But it’s not only been tariffs on China that have been hurting US industries. US Steel announced it would also be temporarily laying off 200 workers from a plant in Michigan because of softening demand for steel. The company has been struggling since the beginning of the year as demand has slowed from Europe. Not helping matters is a 25% tariff on steel imports that was imposed on in 2018.
Unfortunately, no.
There’s little that policymakers and central bankers can do to stop a recession from happening. The best it can do is slow it down, and make it the least bad as possible on the country.
Yesterday, President Trump floated the possibility that his administration is weighing several tax proposals to help spur consumer spending and help wealthy investors. But with an economy as strong as the US is right now, it would have little benefit at this time, and worse, it might exhaust any tools the White House could use when the country is in an actual downturn.
In a new National Association for Business Economics survey, 74% of economists who responded to it said they thought there would be a recession by the end of 2021.
The NABE survey, conducted from July 14 to August 1, found that 2% of the 226 economists who responded to the survey expected a recession to begin this year; 38% expect it to begin in 2020. Thirty-four percent expected a recession to start in 2021, while 14% said it would start later than 2021. An additional 12% did not express an opinion.
Caution is warranted. The survey period mostly took place before the Federal Reserve cut interest rates on July 31. And NABE simply distributes the survey to 1,780 members of the organization, regardless of their level of experience or their position, then tallies the responses of the people who choose to participate.
But we can say for sure that a significant number of economists are not nearly as sanguine about the chances of a recession as President Trump has made it seem.
Here’s what other economists have said:
There’s usually a reason the word recession is mentioned over and over.
It’s because there are indicators of a slowdown that cause a change in behavior, like business investment and consumer spending.
In the current environment, businesses see signs of a possible slowdown so they’re pulling back on major investments.
That’s suppressing additional economic expansion.
Business leaders, for example, usually base their concerns on hard data …not on whether the word recession is mentioned over and over. Businesses, however, are different than consumers. Consumer spending has remained resilient despite “recession talk.” That could change. Frequent mentions of a recession could delay buying a home, for example, which can accelerate the onset of a recession.
President Trump on Sunday said that most economists say “we’re not going to have a recession. Most of them are saying we’re not going to have a recession.”
He also pointed to Walmart’s strong second-quarter earnings as a sign that consumer spending is healthy.
Facts First: We don’t have data on what every economist thinks. But prominent bank economists have warned this month of a significant risk of a coming recession, and a survey of business economists, mostly conducted in July, found that 74% thought there would be a recession by 2021.
The US is still in its longest uninterrupted economic expansion ever; nobody knows for sure if or when a recession might hit. And since we don’t have comprehensive data on economists’ views, we can’t declare Trump’s claim about “most” of them false.
But multiple economists have said this month that the possibility of a recession is real and growing.
Recession concerns have intensified since the beginning of August. During this month, the chances of a quick trade deal with China have appeared to shrink, several major countries have reported poor growth, stock markets have declined, and the yield curve on US bonds (briefly) inverted for the first time since the pre-recession year of 2007.
The Fed cut rates at its last meeting, because it too, was starting to get nervous that signs of economic weakness around the globe and the trade war with China might eventually start to hurt the US economy.
Think of it as an insurance policy: The US economy isn’t grounding to a halt, but in an effort to get ahead of any downturn the Fed decided to cut rates by 25 basis points.
The other big reason for the Fed to act sooner rather than later is that it has much less room to cut from. Interest rates, which control the cost of mortgages, credit cards and other borrowing, are now hovering between 2% and 2.25%.
When rates are that low, the Fed has less ammo to rescue the economy. Instead, Fed officials have made the argument to cut rates more aggressively early, because they’re fighting power will only be stronger.
So could they cut rates again? It might be inevitable, and Wall Street is certainly on betting on it.
At their last meeting, the Fed’s Powell didn’t shut the door completely on further rate cuts, but was also careful not to send the message the central bank had now begun a series of rate cuts.
But in the last three weeks, there’s been worsening economic data abroad and President Trump threatened to escalate further tariffs on China — only to pull them quickly back two weeks later. Bond markets also started flashing warning signs a recession may be coming soon, which the Fed will need to strongly consider.
We’ll know more later today when the Fed releases minutes from its last meeting. That might give us a hint of how much agreement there is on the board to cut further, or whether it’s more important to see how the economy and trade developments evolves.
Then on Friday, we’ll also hear from Powell directly, so he may be even more exacting in what comes next for interest rates policy when he speaks from Jackson Hole. Stay tuned.
Yes, there are plenty of signs to point to that show the economy is still on solid ground: Consumers are continuing to spend, which accounts for two-thirds of the economy. Unemployment is at its lowest level in 50 years. And the economy is still returning 2.1% growth.
But there are also been signs of weakness, too:
The effect of the trade war, and the possibility it could drive prices higher as a result of more tariffs, has consumers beginning to think they may need to reduce spending in anticipation of a recession, according to the latest survey from the University of Michigan on consumer sentiment. The July reading dropped to a seven-month low in August.
But that hasn’t showed up quite yet in retail sales data, which showed a blockbuster second quarter, partly due to Amazon Prime Day.
Americans who have most recently lived through the 2008 financial crisis can still remember the lasting damage it had on their ability to keep their homes, jobs and savings.
But even the financial crisis wasn’t considered a Depression (Although it’s considered to be the second-worst economic calamity to befall Americans after the Great Depression of the 1930s).
A depression happens when an economic decline is sustained, and might potentially last years. The US has fallen into a recession more than 30 times since 1854, and only once into a depression — in 1929.
Until recent history, recessions have happened quite regularly, often occurring every few years. The country is now in a record expansion, which has some worrying that maybe the country is overdue. But even Federal Reserve Chairman Jerome Powell seems to think there’s nothing that says the expansion can’t go on for a bit longer, and he’s maneuvering for what economists call a “soft landing.”
We don’t know if, or when, a recession will hit the United States.
The business of predicting an economic downturn is far from a precise science – and economists are notoriously bad at it. Because unlike the weather, recessions hit before you know it, only to be known once the data comes out.
Recessions also don’t happen just to happen. Some major external event needs to happen to trigger a recession. Think, the housing market bubble or the burst of the dot come bubble.
But there are flashing warning signs across the globe, and the behavior of US bond markets has signaled an economic downturn may be coming sooner rather than later.
One big concern: there are currently nine major countries on the verge of a recession. For example, economic growth in Germany shrank last quarter – technically only a contraction, not yet a recession. China also delivered disappointing economic news, raising fears that their slowdown could also tip the US into a recession.
The economic slowdown in China and President Donald Trump’s trade war have created a lot of uncertainty around the globe, and that means businesses are waiting on the sidelines instead of moving ahead with investment.
But the US economy has been doing well, and grew in the last quarter. Job growth has been steady, and unemployment is at a historic low. And the stock market is at a record high, suggesting some degree of investor optimism. So one big concern is whether bad signs overseas will frighten US consumers and businesses into holding off on big moves that will in turn slow the US economy down.
A recession, put simply, is when the economy stops growing and starts shrinking. Technically, it’s when a country experiences two back-to-back declines in Gross Domestic Product.
But the National Bureau of Economic Research, a century-old nonprofit that is considered the official arbiter of the US economy, has a much wider view on what makes a recession. It says a recession is “a significant decline in economic activity” that includes a loss of jobs, retails sales would fall and wages decline.
One thing that’s important to remember is that recessions can be short and shallow, or they can be severe – like the last one we had, which actually started in 2007 but set off a series of bank failures that triggered the financial crisis of 2008.
President Trump’s take on the economy has been somewhat undercut in recent weeks.
One indicator, the bond market yield curve inversion, went upside-down briefly last week, suggesting that a recession may be looming.
It came after President Trump said he was delaying tariffs on certain consumer goods — such as electronics, toys and sneakers — so that US consumers would not be hurt by higher prices during the holiday shopping season.
Why this matters: Yields on 10-year US Treasury bonds dipped below the yield on the US 2-year bond last Wednesday. It was the first time the 10-year yield was below the 2-year yield since 2007 — just before the Great Recession. Both were hovering around 1.58% as of late Wednesday afternoon.
In another worrisome sign, the yield on the 30-Year US Treasury fell to a record low last Wednesday of about 2.01%.
When shorter-term rates are higher than longer-term bond yields, that is known as an inverted yield curve. The three-month US Treasury already inverted versus the 10-year this spring. Yield curve inversions have often preceded recessions and are a sign of just how nervous investors are about the immediate outlook for the economy. They are demanding higher rates for short-term loans, which is not normal.
Typically, investors expect to get paid a higher rate of return when they are lending money for a longer period of time, because the risks are higher.
President Trump said Tuesday that the administration is looking at possible tax cuts, but reiterated that the US economy is still growing and remains very far from a recession.
“Payroll tax is something that we think about and a lot of people would like to see that, and that very much affects the workers of our country,” Trump said, but cautioned that he’s “not looking to do anything at this moment” as it relates to those potential tax cuts.
But despite Trump’s public-facing vociferousness about the strength of the economy on his watch and aides stating they have no concerns about a recession, officials have discussed the possibility of a potential payroll tax cut to stave off anxiety over an economic slowdown in recent days.
What experts say: Tax policy analysts argue the timing of a payroll tax cut when unemployment is at a historic low and the economy is on solid ground would be a waste of ammunition in the event of a future downturn.
“There’s no economic reason for it right now. Unemployment is extremely low and the economy is slowing a little bit, but it’s slowing from an artificially higher rate from the last round of tax cuts,” said Benjamin Page, a senior fellow at the non-partisan Tax Policy Center.
The White House’s Office of Management Budget has predicted that the deficit will exceed $1 trillion for the entire fiscal year, which ends on September 30.
The nonpartisan Congressional Budget Office in May had predicted a slightly smaller shortfall of $896 billion for the year, with deficits rising above $1 trillion starting in 2022.
President Trump promised during the 2016 election to eliminate the federal debt.
But but the country’s debt has been piling higher under the Trump administration in part due to a $1.5 trillion tax cut signed into law in 2017 along with a massive spending package passed by Congress.
Budget deficits are the norm in Washington: The United States has run a budget deficit for nearly two decades straight. The last time it recorded a budget surplus was between 1998 and 2001. The last time before that: 1969.
Fears of a brewing global recession were renewed this week as markets whipsawed over President Trump’s trade war with China as well as disappointing economic data from both Germany and China.
The US economy, for now, remains on solid ground.
But here’s what could set off a downturn:
