Are we headed for a recession?

Question

The fed just lowered interests rates and the market responded by the dow tanking.

Answer 1

We may very well be, but that is not certain. The stock market tanked because the 25 point cut was already priced in, hense why the market went up the past couple of weeks. Some investers were banking on a 50 point cut, so when it didnt happen, they sold.

I work as an econ analyst and work with this stuff every day. There is a lot of divergence on what people are predicting and no one really know for sure, though the consensus tends to be that growth is/will slow, but we will avoid a recession. If we do go into a recession, it will liekly be in the winter/early spring. If we get to June without a recession, I think we are in the clear.

If I had to make a personal guess, I think there is a 60% chance of avoiding one. Two things are lookign very good in supporting growth and averting a recession.

1. Unlike in the past two recessions, the entire world has beena nd is in a boom right now. Virtually every region in growing. This creats a lot of demand for our exports which has beffered our gorwth so far. The past two quarters growth were high partially beacsue of increased exports, due to high global demand and a falling dollar. It is estimated that for every 3 jobs lost in construction and fianance, that one job has been create din export based inductries. So trade is buffering us somewhat.

2. Despite a slowdown in the general economy, employement has been quite ressilient. The unemployment rate has trickled up from 4.5% to 4.7% but thats still very low and lower then it was as recently as 2005. And unltimately consumer spending is greatly correlated to the labor market. If you have a job, you will keep spending. Unless the lanor market tanks in the next few months, I dont see recession happening inthe near future. Most of the forward indicators for employment, though not really strong, have still been solid.

So my bet is slower growth but no recession. We have to wait untill about June to see if we are in the clear. With that said however, Its not far fetched that we could be in a recession by the Spring.

Answer 2

Probably and this one will be much harder felt by average consumers like you and me. The two previous recessions this country went through were driven by a lack of investment spending, the one were about to enter is going to be consumer driven, characterized by falling consumer spending.

The stock market tanked because some traders had predicted a half percentage point drop in the interest rate but the Fed only cut a quarter point.

Answer 3

Of course, the presses are working overtime to pay for this absurd war and every money run causes more inflation. But our wild consumerism is what's keeping other countries prosperous, and it's in their interest to over value our dollar. So the next recession should be a lot milder than it could be. Or maybe not.

Answer 4

Yes.