Leading Economists Weigh Factors Influencing Likelihood of Recession


Economist, Dr. Mary Kelly, gives a talk on the mainstage at MAXX 2019 in Spokane on Oct. 17.

While most agree that the economy today continues to be strong, the likelihood of a future recession is top of mind for many Northwest credit unions. Weighing in on the subject at MAXX were two leading experts, Dr. Mary Kelly, economist and author, and Dr. Stephen Happel, economist and professor emeritus at Arizona State University.

MAXX attendees were engaged by Kelly and Happel’s lively talks on past, current, and future economic outlooks. They enlightened the crowd, providing them with keen observations and insights for 2020. The presentations were rich in data, with a lot of humor mixed in. 

Kelly and Happel offered a cautiously optimistic economic outlook. Both acknowledged it’s not a matter of if, but when a recession will come.

“We’ve been in the longest period of economic expansion in U.S. history, so sooner or later it’s got to run its course,” Kelly said.

Will 2020 See a Recession?

Both speakers touched on signs that indicate the global economy is decelerating. China is predicting the slowest economic growth rate since 1990, and Japan is slowing slightly. In the European Union, German manufacturing is on the decline, and uncertainty about Brexit continues to loom in the United Kingdom.

Arizona State University, Professor Emeritus of Economics, Dr. Stephen Happel, discusses historical economic trends at MAXX 2019.

The 2020 presidential election also adds to the uncertainty, Kelly said. And according to Happel, the forecasted decline in new housing starts, which has implications for mortgage lending, and falling sales in the automotive industry, should be of concern to credit unions.

“I am predicting a recession in the summer of 2020 for the following reasons: Monetary and trade policy, stock market corrections, risky loans, and the 2020 elections,” Kelly told MAXX attendees.

Happel cited Blue Chip Economic Indicators®, stating that “40% predict a recession next year.”

Keep Things in Perspective

While uncertainty abounds, Kelly encouraged credit unions to keep things in perspective.

There are many positives in the U.S. economy, she said. Consumer spending continues to be robust, and housing starts are on the rise again.

Interest rates are likely to be cut before the end of 2019, and wage gains are solid, “which is a very good sign for the economy,” said Happel.

Kelly noted that the national job market is strong ― unemployment is very low, which makes it hard for employers to attract, acquire, and retain top talent. Unemployment rates for the Northwest follow the national trend, with Idaho having one of the lowest rates in the nation.

She also provided insight into some of the factors that may have implications for regional credit unions, such as the issue of homelessness, affordable housing, and access to quality education.

Overall, both presenters offered a measured but optimistic approach to the economic outlook in 2020.

“I am optimistic about the economy; it looks pretty darn good,” concluded Kelly.

Happel also wrapped up his presentation on a positive note.

“When I look at the economy, I say to myself ‘it’s tremendously robust.’ I think if China tariffs get resolved, growth could go above 2.8% in 2020, so I’m positive on the economy. I am very optimistic.”

Posted in MAXX Annual Convention.