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More Signs Point To An Economic Slowdown In The U.S.

Mar 25, 2019
Originally published on March 25, 2019 6:23 am
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DAVID GREENE, HOST:

There are some more signs this morning that the U.S. economy is slowing down. A new survey of business economists shows many have lowered their forecasts for economic growth this year. The Federal Reserve is also signaling a slowdown after a lackluster jobs report and also some indications that both consumers and businesses are cutting back on spending. Let's talk this through with NPR's Scott Horsley, who's with me. Hi there, Scott.

SCOTT HORSLEY, BYLINE: Good morning, David.

GREENE: So start with this survey of economists and why it's important.

HORSLEY: Yeah. It was conducted by the National Association for Business Economics, which is a group of forecasters that work in a variety of industries and keep an eye on the economy. As a group, they are now predicting growth this year of just 2.1 percent, down from just over 3 percent last year. And while that might not sound like a huge difference, David, if we're talking about a $20 trillion economy, every percentage point is...

GREENE: It's a huge difference.

HORSLEY: (Laughter). It's a lot of money we're talking about. This also signals less confidence in the outlook than the group was showing just three months ago. They were already anticipating some tapping on the brakes. Now they expect that slowdown to be more pronounced. Jack Cline is with the National Retail Federation. He helped put the survey together.

JACK KLEINHENZ: Our survey, in a nutshell, says that the economy's momentum will moderate in 2019 and perhaps considered at an inflection point going forward, largely in part due to what the panelists believe trade policy and a global slowdown is the primary reasons for the slower growth.

HORSLEY: Now, David, we shouldn't overstate this. The forecasters are not anticipating a recession this year, but they definitely think 3 percent growth is in the rearview mirror, and the economy is decelerating, not picking up steam.

GREENE: And what about the Fed? I mean, we always look at the Fed - every little tiny move or anything they do that might suggest something about the economy. Do they seem worried, too?

HORSLEY: The Fed lowered its own forecast for economic growth. They're also now predicting 2.1 percent this year. That's the kind of sluggish growth we experienced for much of the last decade. And Fed Chairman Jerome Powell pointed to some of the same caution flags that the NABE forecasters did. He also talked about slower consumer spending, although, he said that could rebound since we do still have very low unemployment and workers have been getting somewhat better paychecks.

GREENE: Are we seeing some of these concerns play out on the stock market at this point?

HORSLEY: Yeah. The Dow tumbled about 460 points last Friday, or 1.8 percent. The S&P 500 was down by a similar amount. And last week, the bond market flashed a warning sign. Ordinarily, David, the yield or the interest rate on long-term government debt is higher than the yield on short-term Treasury bills. But Duke University finance professor Campbell Harvey said on Friday, that ordinary pattern was flipped on its head.

CAMPBELL HARVEY: We don't see that occur that often. But when it does, it's almost always bad news.

HORSLEY: In fact, the last time it happened was 2007, just before the Great Recession. Now, again, Harvey's not predicting recession right now, but the fact that these rates are even close to each other is another indicator of slowing growth.

GREENE: So I mean, for people who don't follow this that closely, Scott, like, are these - I mean, it's been a pretty strong economy. Are these just some cracks that might be small signs of trouble or, you know, should we really be getting worried here?

HORSLEY: It certainly suggests that the strong growth we saw in 2018 was a short-term blip and that we are now seeing some slowdown. On the positive side, David, the NABE actually raised its forecast a little bit for job growth this year. And if that pans out, it could be good news because when will you get faster economic growth is, you hire more people.

GREENE: NPR's Scott Horsley, a correspondent on NPR's business desk. Scott, thanks.

HORSLEY: Good to be with you, David. Transcript provided by NPR, Copyright NPR.