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US economy will stop short of a recession but stall in late 2020

September 25, 2019

The US economy will slow with real GDP growth easing to 0.4% in the second half of next year — stopping just short of a recession — before rebounding to 2.1% in 2021, according to the latest University of California Los Angeles Anderson Forecast released today.

“Although we are not calling for a recession over the forecast horizon, as we have noted for over a year, it is very likely that economic growth will stall in the second half of 2020 as the effects of the 2017 tax cuts wane and as trade tensions exact their toll on corporate investments,” writes David Shulman, senior economist at the UCLA Anderson School of Management, in an essay titled, “The Year of Living Dangerously.”

GDP growth of 0.4% in in the second half of 2020 is “not quite a recession — but pretty close,” according to Shulman.

His essay cites six concerns: the trade war with China; the weakening of business investment in equipment and structures; the negatively sloped yield curve; the slowdown in employment growth; the inability of housing activity to launch; and the stagnant stock market.

On the positive side, consumption continues to grow, and it represents about two thirds of GDP.

Shulman also forecast job growth to slow to under 70,000 per month, well below the 200,000 jobs per month the nation had become used to.

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