The threat of a recession in 2020 has hovered like a dark cloud most of this year.
While the cloud still lingers, it has less become less ominous and may be receding further into the future.
The forces that threatened to topple the economy, such as the U.S. trade war with China, have become less menacing the past couple of months while three Federal Reserve interest rate cuts have made borrowing cheaper and provided a dose of steroids to the aging economic expansion.
As a result, that record-long growth will keep plugging along, but at a slower pace, as lingering jitters from the trade fight and weaker economies in other countries leave Americans on edge, and less willing to spend.
“Were stabilizing at a kind of modest growth – uninspiring but steady,” says Barclays economist Jonathan Millar.
Besides the prospect of a trade truce with China, other developments have reduced the risk of a recession. The chances that Britain will leave the European Union without a trade deal with the continent have ebbed. And 10-year Treasury yields climbed back above three-month rates in October. That relationship had reversed in March, a yield curve “inversion” that traditionally heralds a bleak outlook.
Forecasters surveyed in November by the National Association of Business Economics put the odds of recession next year at 47%, down from 60% in the spring. Economists polled this month by Wolters Kluwer Blue Chip Economic Indicators figure there’s a 33.1% chance of a downturn in 2020, down from 38.4% in June.
The November employment report, released early this month, bolstered confidence in the economy, which added a booming 266,000 jobs, far more than expected. Monthly payroll gains are averaging 180,000 this year, above the 150,000 to 160,000 many analysts predicted.