| To bastardize a quote from Harry Truman, the economists need another hand. The president once quipped he needed a one-handed economist, as they were prone to saying, “on one hand … on the other.”
Recent weeks have been a rumble for the nation’s economists as, on one hand, signs point to a strong and sustained economic recovery, while on the other, emerging issues began to grow worrisome. And on the third hand, if they had one, are those wise enough to say, “we don’t know.”
On the positive side, unemployment is the lowest it’s been in half a century and homeownership rates are up. And until recently the stock market was on an unprecedented bull charge. But the U.S. market took a nosedive last week and the worldwide markets followed, albeit not as sharply.
In the days prior government bond interest rates rose to levels not seen since 2011 and mortgage rates hovered around 5 percent. Yes, rates are still historically low, but they are on a steady upward climb. And the Federal Reserve has indicated at least one more rate hike is coming this year.
Bless the hearts of the optimistic economists, but the pessimists may come out ahead on this one.
A toxic brew is bubbling in America, comprised of wage stagnation and inequality, housing affordability, rising interest rates and inflation, among other nasty ingredients.
When the next downturn will occur and what will cause it has been a source of speculation and cause of concern since before the last one ended, but that question is being asked increasingly often across the finance and real estate industries this year.
We here at Banker & Tradesman are not economists – we just talk to them – and so we find ourselves on the third hand, in the “we don’t know” camp.
Rest assured, somewhere someone is doing something illegal, barely legal or just downright stupid that will eventually crash the worldwide economy. Will it be Chinese investments in luxury properties? Hyperinflation? The intersection of unaffordable housing, student loan debt, wage stagnation and the largest generation since the Boomers?
Probably that last one, along with a few more of the noxious ingredients bubbling under the surface of the American experience of 2018 – but the timing of it all is still in question.
Also still in question – how bad will it be? That will depend on the root cause(s) and timing of the crash. Given that the most recent recession was the second worst one in the history of our young country, the next one probably won’t be as bad as all that.
But even little recessions can hurt deeply, especially if one has not entirely recovered from the last one – as is the case in many angry, disaffected pockets of the nation.
Large or small, the next recession may have an outsize effect on the state of the union – and the scars from that will be permanent.
