Is the US economy on the brink of recession?
Market volatility, inverted yield curves and weak jobs figures suggest a slowdown in 2019

US markets have picked up this week where they left off on Friday amid growing concern the world’s largest economy could be on the brink of overheating.
Wall Street's head-spinning volatility, which last week shaved more than 1,000 points off the Dow Jones Industrial Average and wiped out 2018’s total gains, “has pushed stocks into correction territory and raised fears for 2019”, says CNBC.
“Extreme fear is once again sending Wall Street into chaos,” says Matt Egan for CNN. “Investors are debating whether the longest bull market in American history is nearing an end or just taking a breather”.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The S&P 500 plunged 3.2% on Tuesday last week before staging a massive recovery on Thursday, only to plunge again after Trump administration officials contradicted each other on trade.
Of primary concern is the ongoing trade war with China, which threatened to escalate dramatically after the US ordered the arrest of one of China’s top executives.
On the domestic front, evidence of inverting US bond yield curves, traditionally a good barometer of impeding economic downturn, has further spooked investors.
On employment, Americans got another positive jobs report on Friday “but it was full of warning signs that the economy is beginning to stutter”, says CNN Business.
Labour Department figures reveal the US economy added 155,000 jobs in November, fewer than expected although the unemployment rate remained steady.
“The report is a sign of a slowing but still strong labour market and further support for the idea that the Federal Reserve may hold off hiking interest rates over the next year as quickly or as much as initially planned,” says CNN.
This is likely to reassure investors who had been worried that the Fed would move too fast to cool off an already decelerating economy.
However, it has also led the International Monetary Fund’s (IMF) chief economist to warn Americans will begin feeling the effects next year of a marked slowing in world economic growth.
“We have long been predicting somewhat lower (US) growth for 2019 than what we are seeing this year,” as the effects of the Trump administration's fiscal and budgetary measures begin to fade, Maurice Obstfeld told the Wall Street Journal.
He added the slowdown “is going to be sharper probably in 2020 than in 2019, according to the data we are seeing,” although he said the US should be spared a new recession.
Some are not so sure. Barbara Rockefeller writing on FX Street says: “We continue to think the US will not fall into recession the minute the new year clock strikes one, but the sentiment is growing by leaps and bounds that 2019 is going to be awful for the US economy unless something comes along to reverse the trend and recession is well-nigh certain for 2020.”
“Markets are fully convinced we are in the last stages of an economic cycle,” Nicholas Colas, co-founder of DataTrek Research, wrote in a note to clients. “Traders are feverishly looking for the dry tinder that will turn a simple short circuit into a full-blown conflagration.”
Others are more bullish.
“For a market that's become increasingly jittery over the US economy, Goldman Sachs has a message: All is not lost,” reports CNBC.
In a research note to investors the investment bank said although falling stocks and rising interest rates will continue to weigh on sentiment, those negatives are likely to be offset by higher wages and oil prices in retreat.
“Three of the key drivers of consumer spending send a positive message for the near-term outlook," the bank's analysts wrote, adding: “The recent declines in the oil price, the high savings rate, and strong consumer sentiment, largely offset the drag from recent stock price declines, tightening lending standards, and higher rates.”
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
The tobacco industry could be the beneficiary of health agency cuts
The explainer Anti-tobacco initiatives could be up in smoke
By Devika Rao, The Week US
-
The full moon calendar for every month.
In depth When to see the lunar phenomenon every month
By Devika Rao, The Week US
-
The best time of year to buy a car
Some months — and days — are better than others
By Becca Stanek, The Week US
-
Who would win in a China-US trade war?
Today's Big Question Tariff pain will be higher for China but Beijing is betting it can weather the storm
By Harriet Marsden, The Week UK
-
Are free trade zones and alliances the answer to Trump's tariffs?
Today's Big Question Temptation is to retaliate with trade barriers, but most agree nations should focus on targeted trade pacts and strengthening cooperation
By Harriet Marsden, The Week UK
-
Trump tariffs: five scenarios for the world's economy
The Explainer A US recession? A trade war with China? How 'Liberation Day' could realign the globe
By Harriet Marsden, The Week UK
-
Why are stocks in 'correction' and not a bear market?
Today's Big Question Investors still hope for a 'flip' in Trump's trade policies
By Joel Mathis, The Week US
-
Trump's tariffs: is EU's retaliation the best move?
Today's Big Question Global US levy on steel and aluminium imports has the EU hitting back but the UK keeping options open
By Harriet Marsden, The Week UK
-
What are reciprocal tariffs and how do they work?
The Explainer And will they fix America's trade deficit?
By Joel Mathis, The Week US
-
Trade wars, explained
The Explainer Free trade is almost always good for any economy – so why is it so unpopular?
By The Week UK
-
Trump's China tariffs start after Canada, Mexico pauses
Speed Read The president paused his tariffs on America's closest neighbors after speaking to their leaders, but his import tax on Chinese goods has taken effect
By Peter Weber, The Week US