by Robert Romano
What ever happened to that imminent recession the mainstream media was reporting?
In August, the sky was falling if you read the headlines.
“Bonds continue to signal oncoming recession—5 experts react to the warning,” CNBC reported.
“A possible recession? Treasury yields invert, sounding economic alarm bells,” the Associated Press worried.
“Half of Americans would blame Trump for a recession if the economy tanks under his watch,” the Business Insider’s Joseph Zeballos-Roig and Walt Hickey noted.
“Is a Recession Imminent?” Kiplinger’s David Payne asked.
All were responding to the inversion of 10-year, 3-month Treasury bond yields then, but in 2019, the U.S. economy grew at an inflation-adjusted 2.3 percent according to the Bureau of Economic Analysis. No recession, thus giving the incumbent President Donald Trump the upside and improving his reelection prospects with the election just months away.
Coupled with 3.5 percent unemployment, the lowest since the height of U.S. involvement in the Vietnam War in 1969 more than 50 years ago, and 6.7 million jobs created since Jan. 2017 when Trump took office, this is simply one of the best economies in our lifetimes.
Black and Hispanic unemployment remains near historic lows.
More than 487,000 new manufacturing jobs have been created.
Real median income increased 1.2 percent for family households and 2.4 percent for non-family households in 2018, with the numbers for 2019 to be published in September.
In 2019, 1.1 million more 16-to-64-year-olds found jobs, more than outpacing population growth, which actually decreased by 238,000 for working aged adults, according to the Bureau of Labor Statistics, increasing labor participation to 74.1 percent for that group, its highest level since 2009.
The dislocation and now recovery of 16-to-64-year-olds in the economy since the 2000s is worth noting, with 9.1 million 16-to-64-year-olds who would have been in the labor force had participation remained at the same level as in 1997. But by 2019, that number was down to 6.7 million, an improvement of 2.3 million since President Trump was elected.
A majority of the job gains for 16-to-64-year-olds, 2.7 million, were among females while males found 2.1 million, unsurprising since there are always more females out of the labor force and therefore have more room to grow.
This is all great news. With the exception of 2006, it was not until 2016 that labor participation among working aged adults began increasing again, a lost generation of opportunity that was rocked by the dotcom bust, and then the financial crisis and Great Recession.
Now, with President Trump, his tax cuts, deregulation and new trade deals with Canada, Mexico, China, Japan and South Korea acting as a stimulus, things are looking up as businesses adjust to the expanded opportunities.
The good news is that there is still a lot of room to grow in 2020 and beyond to bring even more Americans into the labor force. The U.S. economy has still not grown above 4 percent since 2000, and not above 3 percent since 2005, giving the country something to aspire to. We came close in 2018 with 2.9 percent growth, the strongest on record since 2005.
Immediately, while news outlets focused for a day on the temporary 10-year, 3-month inversion on bond markets due to coronavirus fears, it is worth noting that the 10-year, 2-year — perhaps a more reliable indicator — has not re-inverted after a brief inversion in September while the U.S. and China worked out a trade agreement.
But even if the 10-year, 2-year were to invert right now, recessions occur on average about 16 months after such an inversion, and so even if the September signal was real, that would still put a potential recession into 2021, safely after the election. Meaning, for Democrats who have been hoping for an economic downturn before the Nov. 2020 election, the odds are dropping dramatically every month that goes by and things are still great. As usual, stay tuned.
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Robert Romano is the Vice President of Public Policy at Americans for Limited Government.