I’m an Economist: 6 Ways You Can Tell If a Recession Is Coming (And What To Do)
Laura Beck Tue, September 3, 2024 GOBankingRates
Most people are worried about the economy, and the dreaded word “recession” is on many people’s lips. But how can you tell what’s actually happening and what’s not worth worrying about?
GOBankingRates spoke to economists and financial professionals to get the inside scoop on what’s going on in America right now. Here are six ways to tell if a recession is coming and what you can do about it.
Current Economic Outlook
Michael Faulkender, former assistant secretary for economic policy at the U.S. Department of Treasury and currently the dean’s professor of finance at the University of Maryland, provided a measured perspective.
“I do not think a recession is coming but I do think the recent slowdown will continue. There are parts of the economy that are not growing — manufacturing and housing are still struggling,” he outlined. “Other parts like healthcare and government spending are still expanding. The outcome is overall anemic growth, but not yet decline. What the economy looks like one to two years from now depends mightily on the economic policies implemented following the election.”
However, Albert “Pete” Kyle, distinguished university professor at the University of Maryland’s Robert H. Smith School of Business, offered a more cautious view.
“Altogether, risks are tilted towards a recession coming either later this year or next year, but it is not as obvious that this will occur as it was in 2007 or 2000,” he said. “Currently, there are some stresses in the banking system. Banks and non-bank investors are sitting on bad loans related to commercial real estate, particularly shopping malls and commercial office space. These stresses are significant. Compared to the 2008 financial crisis, they are better recognized and probably not as severe.”
Kyle also pointed out another concerning factor — the stock market.
“The stock market is currently at a very high level as a multiple of GDP,” the professor shared. “While earnings are strong, it is not clear whether for how long these high earnings will continue into the future. If there is a decline in corporate earnings, stock prices could fall a great deal.”
Professor Jonathan Ernest of Case Western Reserve University offered a more optimistic perspective. “Currently, the labor market has remained relatively strong, the rate of inflation has decreased, and GDP continues to grow year-over-year. None of these measures would traditionally signal an imminent recession.”
6 Key Recession Indicators
Given these differing views, what signs should we be watching for? Here are six key indicators highlighted by our experts.
Yield Curve Inversion and Steepening
Abe Askil, CEO at Titan Capital Managers, pointed to a historically reliable indicator.
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