Link- http://fivethirtyeight.com/features/are-we-headed-for-another-recession/
This article deals mainly with the thought that a recession is in the near future. According to The Washington Post and the Fortune, we seem to be due for another recession. Why? With the stock market off to the worst start of the year, people think it will happen. There are two different views as to why this recession will hit sooner than later. The first view is based on history, with the belief that it is time for another one. On average, post World War II economic expansions had lasted less than five years. This sounds reasonable, but the writer disagrees. We have had quite a range of expansions, the smallest one being a year and the biggest being ten years. Of course there will eventually be a recession, but we really have no idea when it will happen. The second view mainly looks at China. China took a hard hit with the start of the year with there stock market, and it is slowing down but still looks bad. This is causing China to reduce demand for everything which threatens to destabilize global financial markets.
The writer then goes on to talk about the State of the Union address Obama gave last Tuesday. He listed of good things, like the job market improving, minimum wages should be raised, and big corporations should pay their workers more. One interesting thing Obama talked about was making it easier for people to be able to switch jobs. The Affordable Care Act has helped this out, making available health insurance that does not evolve around a specific job. However, Americans have been changing jobs less than they have in the past. This worries economists because job changes help maximize productivity in the economy.
He ends of the article with two little paragraphs about how only seven percent of U.S. counties have fully recovered from the recession and how oil prices have dropped. Sounds extreme, with only seven percent, but the definition of "fully recovered" is a bit over the top. It measures jobs, unemployment rate, economic output and home prices. And with the oil prices, people are guessing that it might drop lower than 10 dollars a barrel, but we really don't know what will happen.
Brad, great analysis of the article. I agree with the writer when he disagrees with the "doomsdayers" who reason that a recession is going to occur simply because we are due for a recession according to history. He is right when he says that there is really no way of predicting the next recession just based on looking at time intervals between previous recession because there have been ones that have lasted anywhere from 10 to 1 years.
ReplyDeleteWhen the writer talks about Americans changing jobs less, he refers to it as labor-market dynamism and explains that it is better for people to be changing jobs because it means that people are still looking for their "perfect" job. He then proceeds to say that no one is really sure why dynamism has declined. This leaves me skeptical because he, and other experts, cannot explain or back up this proof that they are giving to support a near recession.
In whole, considering the writer says, "If there is one truism in macroeconomics, it is that we're really bad at predicting recessions," I find it hard to get too seriously invested in this article.
I think there will be a rally especially if quarterly reports return positives results. We've seen the stock market perform badly and then begin to pick in small increments. If growth in China begins to pick up again then we'd see positive gains in the global financial markets.
ReplyDeleteChina's market is not looking like it is going to rise in the next two years. If that hurts the United States market then we will most likely enter another recession. I agree with the author when he says that he disagrees with the history theory. It is impossible to track or predict when the next recession is going to happen with the information provided.
ReplyDeleteThe article I read was mainly about how a surging employment will be beneficial to the US economy. Your article goes into a much broader scope of how the recession could occur, and it seems employment isnt the biggest of factors that avoid recessions.
ReplyDelete