Housing’s Impact
Housing, the epicenter of the last crisis, is far from the frothy levels that prevailed prior to that downturn. Residential construction amounted to 3.4 percent of GDP last year, nearly half its 6.5 percent share in 2005. Mortgage debt is more than $1.1 trillion lower than its record high in 2008. And while housing prices have been on the rise, they’ve only just recently recouped all the ground lost during the bust.
Consumers are in much better shape financially after spending years working off debts built up during the housing boom. That’s critical because personal consumption expenditures totaled more than 68 percent of GDP in 2015.
Delinquencies on credit cards issued by banks are near a 15-year low. The saving rate is much higher than it was at the end of the previous expansion. And workers are just starting to see signs of a pick-up in wage growth more than 6 1/2 years after the recession ended.
"For the household sector in the U.S., the underlying momentum has been great," said James Sweeney, chief economist for Credit Suisse Securities (USA) LLC.
Banks too are looking stronger. The number of financial institutions on the Federal Deposit Insurance Corp.’s so-called problem list fell below 200 in the fourth quarter for the first time in more than seven years. Total industry capital now stands at $1.8 trillion, 25 percent higher than at the end of the recession, according to the American Bankers Association in Washington.
Less Vulnerable
"Banks are well prepared for any slowdown domestically or globally," said James Chessen, chief economist for the association.
There are pockets of potential weakness, of course. Kasman worries that companies will cut back on their spending and hiring in response to a squeeze on their earnings.
Profits as measured by the Bureau of Economic Analysis probably fell 7 percent in the fourth quarter of 2015 from a year earlier, he said in a Feb. 19 video posted by JPMorgan.