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By Senator Jack Hill of Reidsville

WHAT ARE THE CHANCES FOR A RECESSION?

Everything today seems to have two sides. The question of whether there is a recession ahead has been floating around for the past year. In fact, a year ago, I was ready to write about the reasons I thought a recession was eminent. So that didn't happen.

Today, there are signs that point towards a slowdown of some kind in the near future. But there are also positives that detract from that conclusion.

So, here are my takes on the signs of a coming recession and the positive signs that may delay or keep one from occurring.

THE SIGNS OF A SLOWDOWN

1. This is the longest length of positive economic growth on record. So, just that fact alone leads one to the conclusion that a recession must be around the corner.

2. The U.S. is not an island....As good as the U.S. economy is chugging along, America is not immune to the faltering world economy and sooner rather than later, its effects will bring down our economy as well.

3. The tariffs war is damaging to the U.S. economy. As noble as the aims of bringing China to some sort of honest trade policy, the current tariff war is crippling agriculture and hurting many manufacturing businesses. Many believe that pressure will lead our economy into recession.

4. Factory production is basic to every economy. A report in the Wall Street Journal recently noted that U.S. manufacturing shrank last month for the first time in 3 years citing the U.S. economy and increasing trade issues with China.

5. GDP of course is the ultimate measuring stick of the economy. The U.S. Commerce Dept. recently reported that GDP rose at a seasonally adjusted rate of 2.0% in the second quarter, less that the 3.1% in the first quarter.

6. The Institute for Supply Management reported slippage in the manufacturing index. Then they referred to the Inverted Yield Curve as a can't miss predictor of recessions citing the yield on the 10 year Treasury bonds dipping below that of the two-year bonds....a reliable predictor, they say, to the last three recessions.

There is a counter argument (isn't there always today?) that Europe's and Japan's banks' negative bond rates and purposeful bond buying are indirectly depressing the U.S. long-term rates.

7. Explaining the rise and fall of the dollar and the whole world-wide currency market is somewhat like explaining what pass interference is...although the NFL will take additional time this year to get it wrong... according to which team you are for. Maybe the simplest way to explain it is that the rise in the value of the dollar follows the uncertainty of the world economy, the unrest over tariff wars imports/exports and other nations' currency instability.

8. There's consumer buying, which is strong and then there's the measurement of consumer sentiment, maybe a better predictor of times to come. The University of Michigan publishes a widely known and regarded index of Consumer Sentiment. In August this Consumer Sentiment Index posted its largest monthly decline since December of 2012, almost 7 years ago. The index reflected fears of rising taxes and decreasing government spending and included negative references to the tariffs war, a problem noted by one third of respondents.

BRIGHT SPOTS COULD PREVENT/DELAY A SLOWDOWN

1. Consumer confidence means everything. That is why it is measured and reported regularly. One of the high spots of the U.S. economy has been the continuing strong showing in consumer spending and the shows of confidence by consumers. Reports from the Commerce Department for July show a seasonally adjusted increase of 0.6% in household spending from June, an increased rate from April and May.

2. It's hard to argue with the historically low unemployment rate both nationally (3.7 %) and in Georgia (3.6%) and with the solid continued job growth. While some many argue about how many are still not in the job market, the fact remains that there are plenty of jobs.

3. The August Non-Manufacturing ISM Report on Business showed economic activity growing for the 115th straight month in the U.S. The Growth in the non-manufacturing sector registered 2.7% higher than the July reading. The Non-Manufacturing Business Activity Index jumped 8.4 percentage points from July increasing for the 121st month.

4. On Sept. 3, Boston Federal Reserve head Eric Rosengren turned a deaf ear to the sounds of a coming recession. He doesn't buy the bond-market palpitations predicting a downturn, preferring to focus on how policies should continue to support and "achieve the Fed's congressionally mandated goals of maximum employment and stable prices." While he sees risks, he still does not see the level mandating aggressive action by the Fed.

5. The Bureau of Labor Statistics report for July showed an increase in non- farm payroll employment of 164,000 jobs with rises in professional and technical services, health care, social assistance and financial activities.

6. The same report showed that hourly earnings have increased 3.2% over the year.

7. Today, September 6, the U.S. Labor Department reported 130,000 non-farm jobs were added in August, that's good but not great, but the unemployment rate stayed at 3.7%.

SUMMING IT UP

There is just a swirl of activity and countermanding statistics flowing back and forth concerning the state of the economy. There are certainly signs of a slowing economy, but even so, there continue to be plenty of positive factors at play. And too, what will be the effect of an expected additional cut in the Fed rate? The glass is half full but gurgling!

For staff use only.