Recession 2020?

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There have been nearly fifty recessions since the days of the Articles of Confederation, some of them (such as the Great Depression, which lasted for three years and seven months from August 1929 to March 1933) worse than others.

The most recent American recession, called the Great Recession, started in December 2007 and did not end until June 2009, with peak unemployment reaching 10% in October 2009 and the peak GDP decline hitting -5.1%. During this time, oil and food prices rose as the property market fell, and because the United States is a leader in international trade, this played a major role in the ensuing international financial crisis. To help combat the recession, the federal government created the Troubled Asset Relief Program (TARP), where the government essentially bailed the nation out and personally bought $475 billion of “toxic assets” (assets thats value has fallen significantly) in an effort to strengthen the economy, and enacted the American Recovery and Reinvestment Act of 2009 (ARRA, also known as the Recovery Act), an $831 billion “stimulus package” meant to preserve any existing jobs and create new ones whenever possible.

But now, as 2019 begins, approximately half of America’s business economists are predicting a recession before or in 2020, and if not before or in 2020, then at least before 2022. Discovered in a member survey by the National Association for Business Economics (NABE), only 10% of members think there will be a recession in 2019, but on the other end of the spectrum, only 11% believe the country will be able to avoid a recession entirely before 2021. Although the economy has since persisted after the Great Recession, with average annual economic growth staying at around 2%, this will not last forever.

Although there was recently a surge in the stock market and people are hoping for a trade deal between the U.S. and China, most strategists assume that the stock market is much more likely to fall by mid-year than rise. That being said, S&P 500 industrials have had good performance as well as the technology enterprises. As Jim Awad (senior managing director at Clearstead Advisors LLC, New York) explains, “What works best in the late cycle is quality growth companies, which tend to be found in tech and healthcare.”

However, although the massive tax cut enacted by the Trump administration was meant to boost investments, efficiency, and earnings, it did none of that on the promised scale, and the inflation that hit the stock market was brief. Additionally, federal spending is predicted to decline in 2019, and the effects of this will continue into 2020.

Other risk factors leaning towards a recession include the quality of international trade, a variable economy, and any uncertainties regarding American international trade, as Federal Reserve Chairman Jerome Powell lists, though he believes the U.S. economy will continue to expand throughout 2019. With these ideas also came the assurance that the Federal Reserve will be patient and “allow the situation to evolve … and allow the data to come in” before making any policy-related decisions (Powell, NYTimes). Additionally, the U.S. will never obtain complete control over the economies of other nations, particularly China, whom America is negotiating with, and Europe, especially considering Brexit.

America began 2019 with a government shutdown, lasting from December 22nd, 2018 to January 25th, 2019, for a total of 35 days and as the longest of all the government shutdowns in American history. It was initiated because President Donald Trump could not agree with Democrats on a bill to fund the federal government for the 2019 fiscal year and lead to the shutdown of nine executive departments with approximately 800,000 employees, and it is estimated to have cost around $11 billion (if not more). With the country in a constant state of political turmoil, it can be difficult to determine how the next couple of years could play out regarding the economy, but the truth of the matter is that a recession is more than likely to come, and something is going to have to be done about it.

About the author

Sky Davis is a 16-year-old V former from Hopkinton, MA. Kitchens don’t tend to like her, but she’s a strong believer that food can fix almost anything, and a mutual love of pizza is a great way to start a friendship. In her free time, she can be found writing, taking photos (of anything and everything), or hanging out with her dogs (who are better than most people). Or eating pizza with friends.

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