Trade policy uncertainty, economic weakness spanning from China to Europe and the tightening of financial conditions could lead to trouble on the horizon, he said.
Weakness Spreading
U.S. factory activity deteriorated in July to an almost three-year low, according to the latest figures from the Institute for Supply Management. In a sign that manufacturing weakness is threatening to spread, the purchasing managers group said its gauge of service providers also dropped to the lowest level since 2016.
Economists worry this weakness will take a toll on what’s been the American economy’s bright spot — the job market.
“The labor market is what hits home the most” for everyday Americans, said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. “As long as you have a job and you’re confident in your job, you’re probably feeling reasonably good about things.”
Despite the uptick in recession odds, economists still see fairly healthy growth as the U.S. is buoyed by a strong labor market. Weekly jobless claims are arguably a more timely gauge of any change in the state of the job market, and it shows no sign of deterioration. So far, applications continue to hover just above a 49-year low.
Republican strategist Brad Todd signaled that if the economy worsens, Trump allies will highlight what they call a Democratic drift toward “socialism.”
“Swing voters believe lower taxes are better for them and higher taxes are worse for them,” he said. “As Democrats move further toward socialism, that will not help them take advantage of any deterioration in the economy, because anybody in America who’s not a raging liberal believes socialism makes the economy worse.”
This article was provided by Bloomberg News.