National recession unlikely in 2020, says Harrisburg Chamber speaker

Ioannis Pashakis//February 6, 2020

National recession unlikely in 2020, says Harrisburg Chamber speaker

Ioannis Pashakis//February 6, 2020

Malcolm Polley, president and CIO of Indiana County-based Stewart Capital Advisors, spoke at the Harrisburg Regional Chamber and CREDC’s annual Economic Forecast. (PHOTO/ IOANNIS PASHAKIS)

The possibility of an upcoming recession has been a hotly debated topic as economists try to pinpoint when the country’s robust economy could take a downturn, but consumer confidence in the market could point to another year in the green.

Hallmarks of a strong U.S. economy, such as an approximately 50 year record low unemployment rate of 3.5% and a 10-year-long rise in the stock market have prompted the business community and economists to ask when the economy is due for a recession.

One signal of a possible recession that has been pointed to by economists has been the inverted yield curve, a term for when short-term interest rates through the U.S. Government yield higher outcomes than long-term rates.

The yield curve inverted last year, which has historically been followed by a national recession.

While the inversion is often seen as a sign of bad things to come, there are other, more reliable sources that could point away from such a recession for at least the time being, Malcolm Polley, economist for S&T bank and president and CIO of Indiana County-based S&T affiliate Stewart Capital Advisors,  said during a keynote address at the Harrisburg Regional Chamber and Capital Region Economic Development Corp. (CREDC) annual Economic Forecast event.

“In every instance prior to a recession happening, you get a dramatic fall off in consumer confidence,” Polley said to the midstate business community at Sheraton Harrisburg/Hershey in Swatara Township, Dauphin County. “It will peak and it will slowly roll over and that’s the beginning of the downturn.”

Consumer spending currently represents 72% of the country’s GDP- both of which have continued to rise since dropping after the 2008 recession.

One way to tell that confidence in the country’s economy, specifically its hiring strength, remains high is through its inclining voluntary quit rate. The voluntary quit rate is a national statistic that tracks the number of employees that quit their jobs without another position lined up for them.

“The fact that the voluntary quit rate continues to incline means that people are saying ‘you know, the world is a pretty good place— if I leave tomorrow I can find another job soon after,” Polley said. “You won’t see this happening in a recessionary environment, pointing to the fact that we really believe that the U.S. economy is in good shape.”

When a recession does strike, Polley said he was concerned about the country’s current interest rates which sit at a range of 1.5% to 1.75%. In order to have room to cut the interest rates in the wake of a recession, he said those rates would need to be between 2% and 2.5%.

Although the country could still be hit by a recession next year, Polley’s answer that there should still be time before that happens should give the chamber’s members a sigh of relief, said David Black, president and CEO of the Harrisburg Regional Chamber and CREDC.

“That’s good news for the business community and that will help drive business this year,” Black said. “It’s really nice to hear from someone who does this for a living, whose head is in the numbers all the time that can explain to people what they should be aware of down the road.”