Uncertainty. It's something economists think about a lot. And for good reason--economies rise and fall based on the confidence of consumers and producers.
I recently read an economic summary distributed by an investment banking firm that quoted analyst Nancy A. Bush. She said: "The watchword at present is "uncertainty'-uncertainty about trade, uncertainty about the strength of economic growth, uncertainty about the start date of the next recession, and political uncertainty galore."
Uncertainty amplifies when economic conditions begin to slow, and when global and national economic conditions appear to be decelerating. With this slowing comes a "piling on" effect as housing and labor imbalances, Federal Reserve Board rate reductions, an inverted yield curve, stock market volatility, rising inventory-to-sales ratios, and falling business sentiment impact economic performance.
I think we are getting to the point now where we can ask the question: Is the risk of a US recession in the next 12 months getting uncomfortably high?
Sure, there are still many positives: Consumers continue to be buoyant and low gas prices, housing price appreciation, rising wages, regulatory reforms, federal tax reductions, and an accommodating Federal Reserve policy stance make it so. In Utah, multi-family vacancies remain low; absorption and rents remain high. Utah's tech sector is growing at more than three times the national average, and unemployment rates throughout the state remain below three percent.
But the line between economic optimism and pessimism can be thin, as confidence changes like lightning. When economic actors experience a collective loss of faith in the economy's future, they enter their economic bunkers to shelter from the approaching storm. A downturn becomes a self-fulfilling prophecy.
In the months leading up to the Great Recession, Utah's economy was riding high and I was on the leadership team of Utah's largest business association. The prior year's job growth reached nearly five percent. We may not have felt invincible, but we felt strong.
We had a retreat in July 2007 with our Board of Governors, a group of 100 of Utah's most prominent business leaders. The mood was jubilant. We even passed out tee-shirts to the business leaders with a raging bull on front. On the shirts, we printed the phrase: "Bull on Business!"
And then ... a few short months later that bull didn't ride anymore. He bucked us off to the ground and left the arena, leaving...