Recession Watch - multiple obstacles to economic growth

New data from Bloomberg estimates the chance of a U.S. recession at some point in the next year is just over 1 in 4. That’s higher than it was a year ago but lower than before the last recession.

The recession probability model developed by Bloomberg economists incorporates a battery of data spanning economic conditions, financial markets and gauges of underlying stress. Some indicators, like the yield curve, are flashing warning signs. Others, like real wage gains, still look constructive on growth.

Federal Reserve Chairman Jerome Powell is seeking to extend the expansion, but with limited firepower. Ahead of the financial crisis of 2008-09, interest rates were around 5%, leaving room to lower rates and stimulate demand. At the start of 2019, the benchmark interest rate was half that.

This all matters as the stock market, supported as it is by low rates, is additionally supported by positive revenue and earnings numbers for 2020 and 2021.

We will update the Bloomberg numbers as they are released over the next few months; for now, we are watching closely as we address the multiple obstacles to continued global economic growth.