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No recession in 2019, Johnson predicts

No recession in 2019, Johnson predicts

Albany economist says strengths of U.S. economy outweigh stresses
No recession in 2019, Johnson predicts
Albany-based economist Hugh Johnson is shown before delivering his annual economic forecast on Friday, Nov. 30, 2018.
Photographer: John Cropley

ALBANY — If Hugh Johnson were a groundhog, he’d be seeing his shadow right about now.

The noted economist and investment strategist delivered his annual economic forecast Friday and predicted there would be no recession in 2019. And the stock market still has some life in it, after rising so far for so long, Johnson said Friday at a Capital Region Chamber breakfast event in downtown Albany. 

The leader of Albany-based Hugh Johnson Advisors did warn that returns on investments may not be as strong in 2019, during the 30th edition of the annual forecast.

As is his custom, Johnson leavened his presentation with a little humor, including a heavily modified rendition of Julie Andrews’ classic “My Favorite Things,” in which he acknowledged Father Time’s predations on his body. 

Johnson’s mind is as sharp as ever, though, as is his ability to make the complicated science of forecasting the economy understandable to people who aren’t trained economists.

Johnson also looked backward Friday, even as he was looking forward. The predictions he offered in 2017 for 2018 have mostly proved out, 11 months into the year. The exception is the inflation rate, which has been a bit higher than he predicted.

As 2018 ends, several things tell Johnson the long stretch of U.S. economic expansion is nearing its end:

  • Population growth is slowing.
  • Worker productivity is stagnant.
  • Oil prices are going to rise.
  • Interest rates are rising and consumer spending is slowing.
  • The ever-growing federal debt is about five years away from crisis level.
  • Investors have moved to traditionally safer stocks, such as utilities, consumer staples and health care as the price of technology stocks slides. “Investors only do that when they think the prospects for the U.S. economy are beginning to darken,” Johnson said.

But he said those concerns are outweighed by other factors:

  • The calculated monthly likelihood of a recession in 2019 is only 11 to 15 percent; 30 percent is where alarm bells ring. (It climbed above 40 percent in 2008.)
  • Labor force participation is growing, albeit slowly — people who want jobs but had given up on finding them are trying again.
  • China has much more to lose in the battle of wills with President Trump and will likely blink first in the damaging trade war.
  • The U.S. Federal Reserve is raising interest rates, but other nations’ central banks are not, making U.S. securities attractive to foreign investors.
  • The index of leading indicators has risen for 29 straight months, and November will likely be the 30th. “You don’t get recessions when you have that kind of performance,” Johnson said.

Balancing out all these factors is the art of his profession. 

Bear markets are invariably followed by recessions, he said, while market corrections are not. So, it’s important to differentiate between a bear market and a correction. Combined with all the other signs, the stock market gyrations of 2018 do not look like a bear market to him, and he doesn’t see a recession coming in 2019.

“I think we’re fine, and let’s just cross our fingers and hope that’s the case,” he concluded.


Johnson also took a few minutes Friday to flag two things he said have a profound impact on the economy, though some might not recognize them as such: Climate change and income inequality.

“I want you all, if you get a chance, to read the current administration’s report on climate change,” Johnson said, referring to the Fourth National Climate Assessment released last week by the United States Global Change Research Program. President Trump panned the 1,500-page report, which warns of profound health, safety and economic impacts from continued climate change.

“Recognize that this is not a hoax. This is not a fantasy. This is based on the very best science that we have in our country, and we all need to get committed to doing something about it,” Johnson said. “It’s an extraordinarily significant issue and one that threatens the U.S. economy -- and the global economy, for that matter.”

Income inequality is another long-running problem with many causes and no easy solution.

Johnson blamed technology, in part, for eliminating skilled-labor jobs that support the middle class.

“America’s 20 wealthiest people, a group that could fit into one Gulfstream G650 jet, are now worth $752 billion, which means they have more wealth than 152 million people who make up the least wealthy U.S. households,” he said, citing a recent report he had read.

“I don’t want to say General Motors purposely contributed to that this week, but obviously, General Motors’ decision to lay off 14,000 people is part of this whole process where 14,000 people are now going to become part of the have-nots vs. the haves.

“We’re becoming a less labor-intensive economy … and that’s something that’s not going to end any time soon, it’s going to create enormous challenges for us, particularly those of us that are in public policy.”

Johnson’s version of “My Favorite Things” drew laughter and sustained applause. His warnings about global warming and income inequality were met with silence.

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