Economist Sees Warning Signs Ahead

Jul 31, 2018

Creighton University Professor Ernie Goss, PhD, said rising interest rates, trade tensions and rising inflation are warning signs of a possible economic downturn. While Goss emphasizes that the U.S. economy is strong, he expects the economy may be headed toward a downturn as early as the latter part of 2019 or in 2020. “As the last recession showed us, it’s very hard to predict the timing, but the U.S. economy is definitely headed toward higher risk,” Goss said.

Goss, said there are signs of trouble as the gap, or yield curve, between short-term and long-term interest rate decreases. The yield curve is currently at 0.30 percent, the lowest it’s been since the last U.S. recession, which was from 2007 to 2009.

“Since 1980, every U.S. recession has been preceded by a period in which short term rates climbed above long-term rates, or the gap between the two rates approached zero,” Goss said.

Another sign of a coming slowdown or recession concerns trade tensions between the U.S. and other global economies as well as current global trade restrictions. “The current trade tensions are a clear and present danger to the overall U.S. economy, particularly for those areas in the nation that spend heavily on exports and depend heavily on trade,” Goss said. “The Chinese are raising tariffs on soy beans and pork. Those are two agriculture commodities where we’ve seen some significant declines in prices tied to trade tensions or tariffs.”