Is the U.S. inching toward recession? Ag economists weigh in on warning signs

Graphic by Lindsey Pound, Farm Journal

Over the past two years, many economists and business leaders have warned that an economic downturn is on the horizon. "While ag economists continue to be at odds when it comes to the likelihood of a recession in the United States, there are also concerns about economic woes around the globe," reports Tyne Morgan of Farm Journal. "Some economists doubt the United States' biggest importers will be able to avoid a recession over the next 18 months."

Ag Economists' Monthly Monitor has kept tabs on U.S. trade partners' ongoing efforts to prevent  a recession. "A survey of nearly 60 ag economists from across the country were asked if the United States' major importers will avoid a recession over the next 18 months," Morgan writes. "Of those who answered the question, nine said 'yes,' but eight responded 'no.' Four remained unsure. . . .when asked to explain their reasoning, the answers revealed a host of concerns, including labor shortages, risks in China and Europe, and the strength of the U.S. dollar."

The U.S. economy has proved robust, but many economists "point to red flags that continue to flash caution signs moving forward," Morgan explains. "One is the fact credit card debt is climbing at a time when inflation continues to eat away at consumers' spending power." 

September's Monitor conducted an anonymous survey asking economists to name the top three indicators they use when considering possible recession. Their replies included:

"I follow Fed monetary actions, interest rates and unemployment levels."

"I follow unemployment rate, hourly wage rate and consumer prices."

"I don't think the Fed can get inflation down to the 2% mandate without a recession if it holds to that mandate."

"Employment growth remains fairly strong, and the U.S. unemployment rate remains historically low. As long as there is not a sizable decline in demand for labor (which is what I believe), the U.S. should, at worst, have a shallow and relatively short recession."

"Ag economists' view on the overall ag economy is also starting to erode," Morgan reports. "The September Monitor shows lower commodity prices, concerns about demand, and a negative outlook for China's economy, all contributing to the changing views, even as the cattle herd and U.S. corn and soybean crops continue to shrink."