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Steady As She Goes


As a longtime member of the National Association of Business Economics (NABE), I closely follow their “Outlook Survey,” which surveys 48 professional forecasters.  The latest one is reassuring.  While the media always frets that a recession is imminent, NABE’s forecasters do not.  Most don’t expect one before 2018 – another two years.  (15% don’t expect one before 2020.)

According to the survey, the most likely contributor to the next recession, whenever it is, will be tightening monetary conditions.  In particular, they worry about credit becoming more difficult.  I’m more concerned about the prospect of “importing a recession” due to slowing economic growth internationally.  (I am especially concerned about Europe’s ability to finance and integrate a million refugees.)

Lastly, the collective estimate of GDP growth rates has decreased.  In December, 2016 growth was estimated at 2.6%, but that has drifted down to 2.2% for this year and 2.4% for 2017.  (2015 was 2.4%)  While low by historic standards, 2.2% is still the envy of the developed world.

When I was an economics student during the last century, business cycles were considered sacrosanct – to be accepted as always true, everywhere.  Business cycles came in different lengths from 4 years to 48 years.  Today, we hear very little discussion of business cycles.  This is largely attributed to the internationalization of business.  Some attribute it to more intelligent economic management.  Some believe severe economic trauma like the 2008/9 global financial crisis causes all cycles to “reset.”  All that may be true, but I doubt business cycles have been eliminated.  In fact, I hope not.  A recession can be quite beneficial, as it “weeds out” the less efficient.  You might call that “survival of the fittest” but I see it as the “more efficient allocation of resources.”  Of course, a recession has the nasty side effect of causing the stock market to drop temporarily and the unemployment rate to rise temporarily.

Fortunately, the professional forecasters tell me not to worry about it – no recession in the near future.

As my Navy friends would say . . . “steady as she goes.”

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