SMM News: according to US media, the US economic expansion has entered its 10th year, and some experts expect growth to continue, but factors such as trade wars and ballooning budget deficits may lead to derailment of the US economy.
According to the website of the Wall Street Journal, the US economy will set a record for the longest expansion by July this year, surpassing the 10-year expansion in the 1990s. In this round of expansion, which began in mid-2009, the US created more than 20 million jobs, and the net worth of US households (the value of assets such as stocks and homes less mortgages and credit card liabilities) has increased by $47 trillion.
Reported that the prospect of this round of economic expansion is of great importance, affecting the fate of millions of American workers and investors. Us President Donald Trump is also counting on a strong economy to ensure his re-election in 2020.
At the same time, the report also pointed out that on the other side of the above indicators, the US economy lacks vitality, the economic growth rate has been at its weakest in record history, and the unemployment rate has not fallen until several years later. Low-skilled workers have only begun to reap significant dividends in the past two or three years, and wage growth has been slow. At the same time, for many families, increasing student loans have become a family burden, with most of the gains from soaring stock markets and rising house prices going to the highest-income families.
Mark Zandi, chief economist at Moody's Analytics, used computer models to analyze factors that could lead to a recession in the United States. The first risk, he says, is a trade war provoked by the US. If Trump insists on implementing all the tariffs he threatens, including a 25% tariff on all Chinese imports to the United States, a 25% tariff on Mexican products, and a tariff on imported cars, This would amount to a large tax on US households and businesses, which would hit confidence and markets and push the US economy into recession by 2020.
Mr Zandi said his model showed that a full-scale trade war would reduce US employment by 3.1 million from the third quarter of this year to mid-2021, while the unemployment rate would rise to 6.6 per cent by mid-2021. In addition, the market value of the US stock market will shrink by 37 per cent. His model assumes that China will take countermeasures, including allowing the renminbi to depreciate, cracking down on US manufacturing, reducing purchases of US Treasuries, pushing up interest rates and causing losses to US housing and stock markets.
Fiscal policy is another uncertain factor facing the U. S. economy, the report said. Even after a decade of economic expansion, the US budget deficit is still moving towards $1 trillion. Recent tax cuts and federal spending have helped boost short-term economic growth and may boost the long-term economic outlook by driving businesses to invest more, but if the economy is threatened, Policymakers may struggle to find room for further tax cuts or spending increases to mitigate the impact on the economy. As Canada experienced in the early 1990s, fiscal austerity during the downturn is likely to exacerbate the recession.
According to the report, the Fed's policy choices are also limited. With interest rates already very low, the Fed has no room to cut interest rates to stimulate lending, spending and investment in a downturn. While many economists expect a recession to occur in the US economy in 2021 or later, Mr Zandi believes the risks are likely to be higher.