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A Recession Progression

March 25, 2019

|Daniel A. White

While some say yes we’re in a recession, I don’t think we are. Still, even if we’re not, it seems like we’re headed there eventually.

Economists tend to be pessimistic and wrong, so they’ll default to a “yes” on recession status questions. Of course, at some point they’re correct, because business exists, so does recession.

The usual definition of a recession is two consecutive quarters of falling real gross domestic product (GDP). But there is ample margin of error in GDP, so skepticism is healthy.

But I still believe the growth phase is near its end, though it could be another year or so before any recession designation can be earned. That said, the timeline might shrink because of any number of things – Brexit, Federal Reserve mismanagement, or trade wars, to name a few.

Instead, hopefully we’ll see growth through 2019. An arrow in that hopeful wish was a Valentine’s Day report announcing a 1.2 percent decline in December retail sales, the worst month-to-month decline since 2009.

But the report came out four weeks late due to the government shutdown. It’s ripe for revision. And even if the data are right, one month is just one of many. It’s not a trend.

Couple the retail blip with the inversion of the two-year and ten-year yield curves, which is a telltale sign of recession, and it feels like recession is inevitable. That’s particularly true because the last five inversions have been by smaller amounts (see below). So, a complete inversion may not be needed for a recession.

Recession – we’ll get there eventually, I suppose.

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