Who thinks there’s going to be a recession by 2021?
Well, three quarters of panelists in the National Association for Business Economics semiannual survey, that’s who.
The poll, administered from January 30 through February 8, is just the latest bit of evidence to suggest that folks are having a hard time positing a scenario where the current expansion, long in the tooth by almost any conceivable measure, can run much further.
On the bright side, only 10% of respondents see the US sinking into a recession this year, but a plurality expects a downturn in 2020, which is generally in keeping with some of the more cautious takes from Wall Street. Just 11% think we’ll make it past 2021 without succumbing.
NABE panelists do not necessarily concur with Wall Street on Fed policy. To wit, from the survey:
A majority of respondents believes that the Federal Reserve’s monetary policy stance is “about right,” and that the Fed is merely pausing its rate hikes rather than ending them for this cycle. Sixty-five percent of respondents expect the upper end of the federal funds target range at year-end 2019 will be 2.75% (39% of respondents) or 3.00% (26% of respondents), compared to the current level of 2.50%. This is in stark contrast with market-based probabilities for rate hikes, which forecast the upper end of the federal funds target rate at year-end will be 2.50%.
Needless to say, not everyone you might care to ask would agree with the contention that the Fed’s policy stance is “about right.”
And speaking of things from the survey that not everyone would agree with, the NABE notes that “the predominant view of survey respondents is that a higher federal funds rate will not derail the global economy (78%).”
Spoiler alert: a higher federal funds has already derailed the global economy or, at the very least, contributed mightily to the malaise across markets in 2018, a year during which USD “cash” outperformed some 90% of assets globally.
On US fiscal policy, “just” 55% think it’s “too stimulative”, down markedly from 71% last August. That said, fully 85% of respondents are some semblance of concerned about the current policy trajectory:
A large majority of respondents (85%) believes that current tax and expected spending policies will likely increase the deficit relative to nominal gross domestic product (GDP) when compared with the Congressional Budget Office’s current 10-year baseline. The majority (53%) of respondents indicates they would be concerned about a U.S. federal budget deficit equivalent to up to 4% of GDP given current economic conditions.
As far as how to ameliorate the ballooning deficit, the breakdown is as follows:
The panel is also fairly evenly split in its views about how to address the current fiscal deficit: 57% favor exercising greater spending restraint, 53% favor increasing tax revenues, and 47% support enacting structural policies to stimulate stronger economic growth. In terms of increasing revenues broadly, 50% of respondents support a broad-based energy or carbon tax and 48% support broadening the individual and/or corporate tax bases. Less popular options include increasing Social Security and Medicare contributions (24%) and enacting a national sales or value-added tax (20%).
That seems to suggest panelists have a more nuanced take on things than Larry Kudlow, whose boilerplate “growth, growth, growth” rejoinder leaves something to be desired in terms of specifics.
We’d be remiss not to note that it’s looking increasingly likely that the next recession will hit in 2020 or, more to the point, during an election year.
Trump’s tax cuts have left US fiscal policy constrained when it comes to stimulating the economy, which means if we do end up seeing a downturn next year, the administration will likely lean harder than ever on Jerome Powell and the Fed.