We are in the midst of ‘recession obsession’ in the US at the moment.
Commentators and pundits are hitting the airwaves on a daily basis analysing every piece of economic data with many warning that a downturn could be on the way.
When the economists have delivered their assessments, cable TV news shows typically turn to political experts to discuss what a recession would mean for Donald Trump’s re-election prospects next year.
A strong economy is Donald Trump’s best asset as he campaigns ahead of Election 2020.
In speeches and media interviews he frequently makes reference to low unemployment rates and economic growth figures. This is usually followed by a warning that it will all end if the Democrats win the White House.
“You have no choice but to vote for me,” the US President told a rally in New Hampshire recently. He warned that without him everything would “go down the tubes”.
“So whether you love me or hate me, you got to vote for me,” he said.
The election is still more than a year away and if the US economy slows over the coming months it could have a big impact on Donald Trump’s bid to retain the presidency.
There have been several warning signs in recent days and weeks.
On Wednesday, the US Department of Labour said that the number of jobs added to the economy from April 2018 to March 2019 was actually half a million fewer than previously thought.
The same day, the Congressional Budget Office issued a warning about the size of the federal budget deficit.
US stocks have suffered sharp falls in recent weeks amid concerns over a possible slowdown and fears of an escalating trade war with China.
And then there is the “inverted yield curve”.
The what? I hear you ask.
Google searches of the financial term “inverted yield curve” have jumped over the last two weeks.
It is an unusual bond market phenomenon that recently occurred in the US for the first time in over 12 years.
It happens when the yield on 10-year US Treasury notes falls below those for 2-year notes, an event that often precedes US recessions.
With the warning signs getting harder to ignore, Donald Trump has started blaming others for the possible slowdown.
One of the main targets of his criticism is the Chairman of the Federal Reserve Jerome Powell. The US President frequently accuses him of not doing enough to boost the US economy by cutting interest rates.
He took to Twitter on Friday to compare the Fed Chairman to the President of China Xi Jinping, writing: “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?”
Right now it doesn’t appear Donald Trump has a strategy to deal with a downtown and has been sending mixed signals on the economy. Over the last week, he spoke about possible tax cuts to boost consumer spending but then later said the cuts were off the table because they weren’t needed.
With the election fast approaching, the US president will ramp up his political campaigning over the coming months. He’ll attack his opponents and highlight his successes while in his office but when it comes to the economy he could be in danger of losing his Trump card.