9 Reasons the US Will Have a Recession Next Year
The last recession was nearly a decade ago and seems light years away based on the current economy. Consumer confidence is at an 18-year high. The October unemployment rate of 3.7% is below what experts call “full employment.” The gross domestic product (GDP) has expanded over 3% two quarters in a row.
Despite all of this good news, there are several reasons a recession may start in 2019 and undercut growth in the short term. Not all recessions are a modest decline over several quarters, as the last downturn showed.
The Great Recession lasted from December 2007 to June 2009, according to the National Bureau of Economic Research, the organization that officially marks the length of recessions. It was the longest economic downturn since the Great Depression. GDP dropped four quarters in a row, with the sharpest decline in the quarter that ended June 30, 2009, down 3.92%. The national unemployment rate reached 10% in October 2009. In some housing markets, prices dropped by over three-quarters, particularly in overbuilt areas like some portions of Nevada and Florida.
The recovery has been equally dramatic. GDP has risen in all but three quarters since December 2009. In some housing markets, prices have increased more than 50% since the end of the recession. The stock market, one measure of economic health, rallied at a record pace. The Dow Jones industrial average moved from 6,507.04 on March 9, 2009, to 25,000 recently.
Tax cuts have led many consumers and companies to become flush with assets. Home values rose by $1 trillion in the first quarter of 2018, compared with the same period a year ago. The new corporate tax laws have caused American companies to repatriate billions of dollars. This repatriation has triggered hiring, dividend increases, and stock buybacks.
The current economy seems impervious to damage, but that invincibility could end quickly.