Among the challenges awaiting President-elect Donald Trump: There is a good chance he’ll have to deal with a recession.
And that has nothing to do with the effects of his economic policies, or the initial negative market reaction to his win.
The U.S. economy has been expanding for seven years. The nation’s average period of economic growth, going back to the end of World War II, lasts about five years. That doesn’t mean a recession is certain or imminent. It does mean there’s a significant risk of one.
Even before the vote, about half of the economists surveyed by CNNMoney last week said they believed there will be a recession at some point in the next four years.
The nation’s gross domestic product, the broad measure of its economic health, grew only 2% or less in four of the last five quarters. That doesn’t leave much room for error in a slowdown. The job market is healthy but is haunted by challenges like a large number of part-time workers and too many people who have been out of work for six months or more.
“Such slow growth necessarily raises the probability of recession,” said John Ryding of RDQ Economics, “because the economy is flying much closer to the tree tops.”
And now there’s Trump. He promises to erect trade barriers and deport millions of immigrants — policies that could hurt the American economy. Trump has vowed to deliver 4% growth and give a giant boost to jobs. But many economists are deeply skeptical.
Beyond those criticisms of Trump’s policies, economists worried about how well positioned the U.S. economy was to avoid a downturn in the next four years.
For example, productivity is barely growing, and neither is the size of the population that is working age. Both of those factors have been critical engines of economic growth in the past.
“That’s the reason we’re having below-trend growth,” said Lakshman Achuthan of the Economic Cycle Research Institute. “That (slow productivity and population growth) gives you 1% real growth, and that is basically what the economy is capable of doing over several years.”
The good news is that economists interviewed before the election don’t see a recession in the immediate future. Nor did they think a downturn would necessarily be as severe as the Great Recession, which lasted from 2007 to 2009 and cost about 9 million jobs.
“It will be milder,” said Mark Zandi, chief economist of Moody’s Analytics “It won’t be the cataclysmic, near-death experience.”
Conventional wisdom has been that the business cycle prevents expansions from continuing year after year. Indeed, if President-elect Trump avoids a recession for the next four years, it will mark the longest period of sustained growth in the nation’s history.
But Zandi, Achuthan and other economists say that an economic expansion doesn’t necessarily have a limited shelf life. After all, it’s been 25 years since Australia had its last recession.
“I think it’s a myth that expansions die of old age,” said Fed Chairman Janet Yellin at a press conference late last year. “The fact that this has been quite a long expansion doesn’t lead me to believe … its days are numbered.”
But even Yellin concedes that with every year that goes by, the odds that the economy will experience the kind of shock or market imbalance that can start a recession increase.
That’s one reason why only two of the 12 postwar presidents — Lyndon Johnson and Bill Clinton — avoided a recession at any point during their tenure.
