Business Economists Expect U.S. Recession to Start in 2020 or 2021

Business economists are split about when the next U.S. recession will start, and few expect it will begin this year.

According to the latest survey from the National Association for Business Economics, 38% of the 226 economists surveyed peg the start of the recession in 2020, down from 42% in the February survey, and 34% expect the recession will begin the following year, up from 25% in February. Only 2% expect the recession will begin this year.

The latest semi-annual survey was conducted primarily between mid- and late July, before the Federal Reserve cut rates on July 31, which was its first rate cut in more than 10 years. Despite the timing, respondents expect that a “shift in monetary policy” will delay the start of the next recession, said NABE President Constance Hunger, the chief economist of KPMG, in a statement.

But close to half of the respondents (48%) expect they will look back after the next recession hits and wonder why the government didn’t do more to support the economy when “times were good.”

Just over half of respondents (52%) anticipate the upper end of the federal funds rate, now at 2.25%, will fall to 2% or below by year-end 2020. Fifteen percent expect it will remain where it currently is, although the current level was not known at the time most respondents were surveyed.

Almost all respondents (96%) support continued congressional oversight of the Federal Reserve and 55% said President Donald Trump’s criticism of the central bank affects the public’s trust in the institution though not the Fed’s decisions.

Respondents’ attitudes about fiscal policy shifted in the latest survey. Just over half (51%) view fiscal policy as “too stimulative,” down from 71% last August. About one-third consider fiscal policy “about right,” which was also the characterization of monetary policy by 62% of respondents, down from 76% of respondents last August.

A key stimulus package was the tax cut legislation that passed in 2017 and took effect in 2018, but more than half the survey respondents (56%) say those cuts have had a negative impact on housing activity over the past year and a half. Among the changes enacted by the legislation were a $10,000 cap on the state and local tax deduction and a 25% cut in the maximum mortgage interest rate deduction for qualified loans to $750,000.

Panelists were mixed on other economic stimulus policies. Sixty-one percent favor raising the minimum wage, which is currently $7.25, but 20% believe some workers, such as teenagers and those working for tips, should be exempt from the higher wage. Almost two-thirds (64%) oppose forgiving most or all of the student debt in the U.S., which has been championed by Democratic presidential contenders Elizabeth Warren and Bernie Sanders.

On the global front, 84% of respondents expect growth will slow from the 3.6% rate reached last year, and close to 60% anticipate growth will slow to somewhere between 3% and 3.5%. Forty percent of respondents expect a no-deal Brexit.