There has been a lot of recent chatter by journalists, academics and businesses as to whether the next recession is imminent. But what does the data say? This session will analyze current trends that show both positive and negative signals on the strength and direction of the U.S. economy. It will also discuss the risks that could trigger a downturn. You will leave with a better understanding of how to interpret the economic trends reported in business news.

1. Is a Recession Coming?
The Good, the Bad and the Ugly of Economic Trends
Thomas J. Weinandy
Business Economist and Ph.D. Candidate
Western Michigan University
Great Lakes Ice Cream + Fast Food Association Trade Show 2020

2. Overview
The Good: Strong labor market & consumer spending
The Bad: Slowing business & GDP growth
The Ugly: Serious downside risks
When to expect a recession
2 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

3. Economists are like meteorologists…
3 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
• We model a very messy
world
• We consider many different
measures
• We like to speak in
probabilities
• Only the loudest people end
up on TV

4. The Good
Households are doing quite well
4 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
1. Strong labor market
2. High consumer spending
3. High consumer confidence
4. Low inflation

5. The Good: Strong labor market
5 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

6. The Good: Strong labor market
6 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Unemployment (Michigan)
5%
10%
3.9%
2010 2020
15%

7. The Good: High consumer spending
7 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Average hourly wages (US)
$23
$26
$28.32
2010 2020
$29

8. The Good: High consumer confidence
8 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

9. The Good: High consumer confidence
9 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Consumer Sentiment (US)
60
80
99.3
2010 2020
100

10. The Good: Low inflation
10 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

11. The Good: Low inflation
11 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Inflation (US)
0%
1.5%
2.4%
2010 2018
3%

12. The Bad
12 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Economic output is slowing at home and abroad
1. Corporate profits are flat
2. Manufacturing output is shrinking
3. GDP growth forecasted to slow
4. The yield curve inverted

13. The Bad: Flat corporate profits
13 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

14. The Bad: Flat corporate profits
14 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
After-tax corporate profits (US)
$1.2 T
$1.6 T
$1.84 T
2010 2020
$2.0 T

15. The Bad: Decline in manufacturing
15 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Manufacturing output growth (US)
-5%
0% -0.5%
2010 2020
5%

16. The Bad: Slowing GDP growth
16 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

17. The Bad: Slowing GDP growth
17 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Inflation-adjusted GDP growth (US)
0%
2%
2.3%
2010 2020
4%
2/3 of business
economists
forecast 1-2%
growth in 2020
(NABE survey, Jan. 2020)

18. The Power of growth rates
18 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
The Rule of 72 says that at an r% annual growth rate,
your principal will double every 72/r years
• GDP growth at 2% doubles every 72/2 = 36 years
— After 100 years an economy will be 7.2 times bigger
• GDP growth at 3% doubles every 72/3 = 24 years
— After 100 years an economy will be 19.2 times bigger

19. The Bad: Inverted yield curve
19 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
• The Yield Curve is a
measure of expected
future economic
growth
• It “inverts” when
short-term interest
rates are higher than
long-term interest
rates

20. The Bad: Inverted yield curve
20 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
10y gov’t bond minus 3m gov’t bond
0%
2%
0.2%
2010 2020
4%

21. The Ugly
21 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
History teaches a weak economy + crisis event = recession
• 1929 stock market crash
• 1973 OPEC oil crisis
• Early 2000’s dot-com bubble, 9/11
• 2007-2008 mortgage crisis

22. The Ugly: Trade Wars
22 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

23. The Ugly: Corporate Debt
23 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

24. The Ugly: Geopolitical Event
24 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

25. The Ugly: Geopolitical Event
25 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

26. Is a recession coming?
26 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
• Of course
• There have always been business cycles
• But when?
• And with what likelihood?
• And how bad will it be?
• National Association of Business Economists
December 2019 survey

27. Is a recession coming?
27 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
…May 31, 2020?
Yes
21%
No
79%
…December 31, 2020?
Yes
43%
No
57%
…May 31, 2021?
Yes
66%
No
34%
NABE Business Economists were asked:
Will the US economy be in a recession by…

28. Is a recession coming?
28 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

29. Conclusion
The Good: Strong labor market & consumer spending
The Bad: Slowing business & GDP growth
The Ugly: Serious downside risks
When to expect a recession:
Maybe in 1-2 years, hopefully longer
29 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020

30. Conclusion
30 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
Thank you!
tom.weinandy@gmail.com
linkedin.com/in/tomweinandy

31. Recommendations
31 / 30Is a Recession Coming?Thomas J. Weinandy GLIC+FFA February 8, 2020
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