Below the Headlines: The 2020 Economy

Our guest blogger today, Andy Paparozzi, is Chief Economist for SGIA, and presenter for the December 17, 2019 Mailers Hub webinar, the 2020 Economic Outlook. 

The American economy has now grown 125 consecutive months, making the current upturn the longest on record. And headline numbers, such as 615,000 jobs added and retail sales up 4.0% over the last three months, suggest more growth is ahead.

But what’s happening below the headlines? We need to know because recessions often creep in while the headlines are still positive. For example, during the three months prior to the Great Recession of 2007-09, the economy created 280,000 jobs and retail sales increased 4.6%. Less than one year later, everything had changed.

Two trends are of particular concern. The first is ongoing trade disputes, or international economic brinksmanship. One day the language is conciliatory and the next day it is confrontational. Two years in and we still don’t know where it’s all going. We do know that the uncertainty — Is one of my products or essential inputs next up for a tariff hike? — has dampened capital investment, which is the foundation of sustained, non-inflationary economic growth.

The second is severe shortages of skilled personnel. Strong labor markets support the compensation gains essential to healthy consumer spending. (Consumer spending accounts for nearly 70% of GDP.) But when labor shortages become so severe that employers are forced to hire practically anyone and labor turnover spikes because practically anyone can make a few more bucks somewhere else, productivity takes a hit — and eventually so do profitability, hiring, compensation and consumer spending.

Concerning recessions, we are never due for one — i.e., economic expansions do not die of old age. Rather, recessions are caused by specific factors, such as the excesses in financial markets and real estate markets.


 Click here to register for the webinar on Dec 17, 1 pm - 2 pm ET


And they are not black swans. Even with the Great Recession, which was unlike any recession in decades, the warning signs were there: the mispricing of risk, the complex interdependencies created as that risk spread across the global financial system, the lack of an effective fail/safe system to contain the risk, etc. Richard Bookstaber laid them out in A Demon Of Our Own Design—Markets, Hedge Funds, and the Perils of Financial Innovation well before they drove the economy into the ground. Others also tried to warn us. But we dismissed them as fearmongers because the headline numbers were strong.

In Economic Outlook 2020, a Mailers Hub webinar, December 17, 1:00 – 2:00 pm ET, we will look below the headlines. Are we seeing the kinds of excesses that could push the economy into recession next year? How much drag are international economic brinksmanship and severe labor shortages likely to exert on growth? Are the economy’s fundamentals strong enough to extend the record expansion through 2020? Are they strong enough to speed the economy up? We have a lot to discuss. I hope you will join us.


Andy Paparozzi joined SGIA in July 2018. With over 30-years in the industry, Andy developed the NAPL's State of the Industry Series, Capital Investment Report, and numerous other studies on the commercial printing industry’s performance and prospects. He has also taught mathematics, statistics, and economics at various colleges.

 

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