America’s on a roll, but will it roll over into recession?
Where were you when the next recession hit?
Oh please, you grumble as you scan the headlines over your Sunday morning coffee. Economic soothsayers have been predicting the start of the next recession since before the last one — you remember that one, don’t you? — was even done. They haven’t been right yet.
Why do you have to darken our last few days of summer, before we dive in earnest into fall, the school year, football season, the holidays and the rainy season? We’ve already got the continuing presidential campaign that still has more than a year to run, and that’s more depressing news than anyone should have to bear.
We don’t bring up the subject because we enjoy wallowing in economic gloom and want you to join us. Bad news, or even suggesting that it’s coming, is not good for our business, or for most others. A Mariners run to the World Series — yeah, like that’s around the corner — will move a lot more news product than one more story about the perpetual rebuilding project.
We talk about the prospects for a recession specifically because we remember the last one. In fact we remember the last two, the double hit of the dot-com bust and 9/11, hitting two crucial industries in this region, and then the housing-finance-led Great Recession, one which cost people their jobs, homes and businesses.
Recessions are nothing to trifle with or ignore, as the experience with the last two impressed upon us. They are inevitable. They can’t be fended off forever, but they can be prepared for. Watchfulness is always a prudent course of action, even when times are good (in fact, the times when everything is going swimmingly are when wariness is most called for).
What recessions aren’t is predictable — not in their timing, their severity, their triggering event and where they’ll hit (by geography or business sector). What’s been maddening about trying to determine when the next recession will arrive is that the signals and analysis can, at the moment, be used to make just about any argument as to the economy’s condition.
Take, for example, the American Trucking Associations’ monthly truck-tonnage index, which is worth watching since trucks carry 70 percent of domestic freight, and truck manufacturing is an important business in the Northwest (Kenworth in Renton, Freightliner in Portland).
The July index was up 6.6 percent in July from June. Yay! Right? Not exactly. It had been down the two previous months. Year-over-year, the index is up 7.3 percent, which is a nice gain but also means there have been some sharp changes of direction.
“Tonnage in 2019 has been on a rollercoaster ride, plagued with large monthly swings, which continued in July as tonnage surged after falling significantly in May and June,” said ATA chief economist Bob Costello in a press release. “However, take out the month-to-month noise, and you see that truck tonnage is still on a nice upward path.”
Read into that what you will. It’s not an isolated occurrence, and month-to-month noise, if it goes on long and loud enough, isn’t something you can just filter out.
So as we roll into the last third of the year, let’s grab some quick snapshots of where we are and where we might be going.
Those 737 Max jets piling up in Renton, Moses Lake and wherever Boeing can park them are bad news for the company’s financials, but so far it hasn’t hurt employment. If anything Boeing will need all hands on deck to get planes to customers once regulators clear the plane for service. The bigger long-term issue will be canceled and never-placed orders, whether due to concern about the plane itself or a global economic slowdown that reduces airlines’ needs for more jets.
The tech sector, which carried Seattle through the recession, is under attack politically. Despising Big Tech is the one issue Trump and the Democrats, as well as European leaders, seem to agree on. One other troubling issue: the number of self-styled tech companies going public while continuing to generate barrels of red ink. That didn’t work out well for the dot-coms.
The industry hasn’t recovered to pre-recession levels, which might be a good thing if it means the excesses that made the downturn so nasty have been avoided. Were the banks any smarter about lending policies this time? Only one way to find out.
Where are we on trade relations with China, Europe our Nafta partners? What day is it? What hour is it? Are we talking? Imposing tariffs? Suspending tariffs? The uncertainty and reversal of courses have as much impact as agreements and policies that stick.
The announcements of store closings continue, but that’s got little to do with the economy and everything to do with how Americans shop these days. A recession won’t help, but a booming economy won’t save it.
Debt levels and taxes
Governments at all levels are racking up debt and raising taxes to finance spending. That’s not going to leave them much room to maneuver if — make that when — the next recession arrives.
The obvious conclusion is that there’s no obvious conclusion. Experience says we’ll have a recession. History says we’re overdue for one. Beyond that, it’s idle speculation on whether we’re already in the early days of one or a downturn can be postponed for another year, who will pay the heaviest price and who will escape unscathed.
Have fun this fall.