Despite signs that the U.S. economy is beginning to slow, some economists say the odds of a recession hitting within the next two years are unlikely.
At UNLV’s Center for Business and Economic Research and the Las Vegas Global Economic Alliance’s Outlook ‘20 event Tuesday morning, Chris Thornberg, founder of research firm Beacon Economics, said he remains bullish on the U.S. economy’s growth, which he described as steady and sustainable.
“The chance of a recession over the next 24 months is still very low,” he said.
Thornberg said economies are cyclical, but that doesn’t mean the country is due for a recession just because it’s in the longest expansion of economic growth in its history.
“Recessions are anomalies. Growth is the default mode for any economy,” Thornberg said. “What causes that anomaly is a large, negative shock to the system. And where that shock comes from can vary.”
Until that shock hits the system, Thornberg expects the economy to continue as is. He described the current state of the U.S. as having a “Goldilocks economy” — one that’s not too hot, not too cold. He pointed to the country’s steady GDP growth, low interest rates, a strong labor market, constrained debt levels and a housing market that’s bouncing back.
“Everything is on steady, unexciting, sustainable paths,” he said. “This is not the economy of 2006.”
Talks of a looming recession emerged in August, after the yield curve inverted — meaning the benchmark 10-year Treasury note slipped briefly below 2-year Treasury yields. Such an event has preceded at least the past five U.S. recessions and is a sign of economic pessimism.
But Thornberg remains optimistic.
“An inverted yield curve is a sign that the Federal Reserve was worried about the economy,” he said. “They may be worried, but there’s nothing to worry about. Things are fine.”
There are a few caveats, according to Stephen Miller, the director of UNLV’s CBER and another speaker at the event. He said he believes the economy is beginning to show some red flags, with more companies having concerns about the economy and the manufacturing sector showing signs of weakness.
He also pointed to various factors that could push the U.S. toward a recession, including an economic downturn in China, monetary policies from the Federal Reserve and the U.S.’s trade policy.
Yet Miller also voiced optimism on the economy’s near-term future.
“There are a few small signals of a recession out there, but I don’t think that they really add up to a call,” Miller said.