economics

Asking economists: What are the odds of a recession in the next year and a half?

Growth in the U.S. economy slowed at the end of 2015 amid growing economic storm clouds from overseas and other challenges.

In our 1st-quarter 2016 Bankrate Economic Indicator survey of leading economists, we asked:

What are the odds that the U.S. economy could tip into a recession in the next 12-18 months?

Scott Anderson, chief economist, Bank of the West

“20%. Tightening financial conditions, growth shocks from abroad and more global deflation could seriously damage business and consumer confidence leading to an unexpected downturn in the U.S. economy. Risk of a U.S. recession remains elevated in my opinion, but not significantly so. I do see more downside risks than upside risks to our forecasts at the moment.”

-- Scott Anderson, chief economist, Bank of the West

Dean Baker, co-director, Center for Economic and Policy Research

“15%. It is difficult to see the basis for a recession. There are no asset bubbles to burst, nor is the Fed likely to go through a round of large rate hikes that could lead to a recession. Slow growth is likely, a recession is not.”

-- Dean Baker, co-director, Center for Economic and Policy Research

Bernard Baumohl, chief global economist, The Economic Outlook Group

“20%. None of the typical precursors of recession are present. Low interest rates, cheap energy, dormant inflation, the lowest input costs for business in modern history are all unabashedly positive for the economy.”

-- Bernard Baumohl, chief global economist, The Economic Outlook Group

Nariman Behravesh, chief economist, IHS

“20%. Recessions occur randomly and, on average, every 6 years -- and therefore have around a 15% probability. The unsettled situation in China raises the odds to 20%.”

-- Nariman Behravesh, chief economist, IHS

Scott Brown, chief economist, Raymond James

“18%. There is some risk that business fears will become self-fulfilling (as firms curtail capital expenditures), but the consumer accounts for 70% of the economy, and spending should be supported by strong job growth, higher wages and low gasoline prices.”

-- Scott Brown, chief economist, Raymond James

Robert Brusca, chief economist, FAO Economics

“40%. The odds of tipping over are rising as excesses become manifest and as faith is lost in central banks around the world. The U.S. economy simply is losing its dependable sources of growth. A large bloc of people has not saved enough for retirement. That is going to hit consumption.”

-- Robert Brusca, chief economist, FAO Economics

John Canally, chief economic strategist, LPL Financial

“30%.”

-- John Canally, chief economic strategist, LPL Financial

David Crowe, chief economist, National Association of Home Builders

“15%. The risk is small, assuming personal consumption and fixed investment rebound from 4th-quarter softness. If oil and commodity prices worsen significantly, U.S. domestic growth could suffer.”

-- David Crowe, chief economist, National Association of Home Builders

Amy Crews Cutts, chief economist, Equifax

“20%. Pressure has risen in the past 2 months. Recession likelihood is still low, as the U.S. consumer is seeing more labor demand, some upward wage pressures, and low energy prices, all supportive of the growth engine.”

-- Amy Crews Cutts, chief economist, Equifax

Bill Dunkelberg, chief economist, National Federation of Independent Business

“15%.”

-- Bill Dunkelberg, chief economist, National Federation of Independent Business

Seth Harris, distinguished scholar, Cornell University Industrial & Labor Relations School; and counsel, Dentons

“10%. The fundamentals of the American economy are sound, and we can expect growth that is somewhere between slow and moderate in 2016. Absent a major and unexpected shock, there's no reason to predict recession.”

-- Seth Harris, distinguished scholar, Cornell University Industrial & Labor Relations School; and counsel, Dentons

Nayantara Hensel, former chief economist, U.S. Navy

“The probability of a recession is 70%.”

-- Nayantara Hensel, former chief economist, U.S. Navy

Robert Hughes, senior research fellow, American Institute for Economic Research

“30%. Labor market gains should support consumer spending, offsetting weakness in other specific (limited) areas of the economy, provided the Fed does not raise rates too aggressively.”

-- Robert Hughes, senior research fellow, American Institute for Economic Research

Hugh Johnson, chairman and chief investment officer, Hugh Johnson Advisors

“There is, as an estimate, a 30% chance of a recession within the next 12-18 months. The message of the financial markets, collectively, is that the bull market has ended and a bear market to be accompanied by a recession has begun. Although most monetary and economic variables remain positive, indicators that tend to lead the economy have begun to deteriorate.”

-- Hugh Johnson, chairman and chief investment officer, Hugh Johnson Advisors

Jack Kleinhenz, chief economist, National Retail Federation

“About 20%. Payroll growth is expected to increase in response to a growing U.S. economy. Outside of the struggling manufacturing sector, the economy is doing reasonably well and showing resiliency.”

-- Jack Kleinhenz, chief economist, National Retail Federation

Jeremy Lawson, chief economist, Standard Life Investments

“30%. Although domestic economic imbalances are not severe, there is clear evidence of stress in financial markets. Historically, financial stress has often been a leading indicator of economic downturns as wealth effects, tighter credit conditions and the generalized increase in uncertainty weigh on capital and consumer spending, and eventually hiring decisions. Our central case is that the U.S. economy continues to grow moderately, but the risks are firmly to the downside and financial stress must dissipate for them to be realized.”

-- Jeremy Lawson, chief economist, Standard Life Investments

Alan MacEachin, corporate economist, Navy Federal Credit Union

“30%. While the U.S. economy will continue to grow at a slower-than-average pace relative to the last 30 years, it will likely not dip into recession over the next 18 months. Wages and household incomes are poised to rise further in response to the tight job markets. Moreover, household balance sheets remain solid as consumers both pay down debts and increase their savings. Overall confidence levels remain elevated and there is increasing evidence that the millennial generation is forming households at an increasing rate.”

-- Alan MacEachin, corporate economist, Navy Federal Credit Union

Bernard Markstein, president and chief economist, Markstein Advisors

“15%. Despite current concerns, the U.S. economy is fundamentally strong and continues to grow, albeit at a modest pace. Rising employment is drawing people back into the workforce, which boosts consumer spending. We are seeing early signs of improvement on the wage front. Inflation remains moderate. The U.S. economy appears to be able to move forward despite economic troubles abroad. Nonetheless, a weak global economy remains the biggest threat to continued growth in the U.S. Also, the U.S. economy is fragile enough that an unexpected shock (major negative event) could push the nation into recession. Although unlikely, excessive tightening (raising interest rates too fast) by the Fed also could send the country into recession.”

-- Bernard Markstein, president and chief economist, Markstein Advisors

Ward McCarthy, chief financial economist, Jefferies

“15%.”

-- Ward McCarthy, chief financial economist, Jefferies

Jim O'Sullivan, chief U.S. economist, High Frequency Economics

“23%. There are always risks ...”

-- Jim O'Sullivan, chief U.S. economist, High Frequency Economics

Satyam Panday, U.S. economist, Standard and Poor's

“Odds of a recession are between 15% and 20%. … Although we're now 20 months past the average expansion cycle (post WWII), we don't see the end of the U.S. economic expansion coming any time soon. Inflation is on the low side, so the likelihood that the Fed will quash the expansion seems remote. With the economy only modestly gaining steam, there's only a small chance of overheating, so the central bank can take its time raising rates. The December hike of 25 basis points -- from near 0% -- plus a couple more this year would still keep the federal funds rate at about where the Fed would bring it to during previous recessions, keeping policy still very accommodative.”

-- Satyam Panday, U.S. economist, Standard and Poor's

Lindsey Piegza, chief economist, Stifel Nicolaus & Co.

“Less than 20%. The bigger concern is non-accelerating growth.”

-- Lindsey Piegza, chief economist, Stifel Nicolaus & Co.

Lynn Reaser, chief economist, Point Loma Nazarene University

“20%. Job gains have been the primary force driving the economy, through the impact on household spending. Any catalyst, ranging from a further plunge in domestic stock prices to a major downturn in China, that would stunt company hiring could drive the U.S. economy into recession.”

-- Lynn Reaser, chief economist, Point Loma Nazarene University

Sean Snaith, director, University of Central Florida Institute for Economic Competitiveness

“40%. The toxic nature of the global economic environment, if it persists or worsens, could be enough to derail an expansion that is getting long in the tooth.”

-- Sean Snaith, director, University of Central Florida Institute for Economic Competitiveness

Phillip Swagel, professor of international economic policy, University of Maryland School of Public Policy

“25%. I expect moderate growth but could see a recession arising from spillovers from weak foreign growth that affects U.S. businesses, along with financial spillovers from low oil prices.”

-- Phillip Swagel, professor of international economic policy, University of Maryland School of Public Policy

Diane Swonk, economist and founder, DS Economics

“20% or a little higher. That is double what I expected last year, and not insignificant. Much rests on the Fed's ability to pivot on its communications, and at least acknowledge the cries of Wall Street. If the recent rout turns more into a panic on Wall Street, all bets are off, as CEOs will be forced to cut employment more aggressively than is warranted by domestic demand to keep shareholders at bay and their jobs intact.”

-- Diane Swonk, economist and founder, DS Economics

David Wyss, adjunct professor of economics, Brown University

“15%. The weakness in overseas economies and the usual geopolitical problems in the Middle East are the primary worries. Policy uncertainty because of the U.S. election could be an additional problem.”

-- David Wyss, adjunct professor of economics, Brown University

Lawrence Yun, chief economist, National Association of Realtors

“30%. The capitalists are on strike with so little investment activity because of regulatory burdens and uncertainty. Therefore, one major mishap -- like slow homebuilding, a scale-back in consumer spending, or a reintroduction of sequestration -- will tip the GDP growth into the negative.”

-- Lawrence Yun, chief economist, National Association of Realtors

Mark Zandi, chief economist, Moody's Analytics

“20%.”

-- Mark Zandi, chief economist, Moody's Analytics

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