Is the U.S. economy signaling slowdown, or recession?

December 28th, 2007 | Category: Forecasts, Economic Data

In a column in Forbes Magazine, National Editor Robert Lenzner poses, arguably, the most urgent question for 2008: “Is a recession ahead?,” then offers barometers that may supply insight on the condition of the world’s largest economy.

Modest job creation, manufacturing figures well below their June 2007 high, the housing slump, falling consumer expectations, and decelerating earnings growth are the indicators that propose a recession may be ahead, Forbes reported Friday.

Meanwhile, investor expectations are a mixed bag - - neither bullish nor bearish, but flat - - which makes the argument that investors aren’t convinced a recession is ahead considering they can’t see it.

Economic Analysis: The Forbes review didn’t place decent emphasis on two variables

that may very well tip the scales, in either direction, regarding a recession in 2008: oil prices and the market’s ability to absorb credit market write-offs and defaults. The U.S. economy is likely to continue to expand whether gasoline prices retreat below $3 per gallon that year, as opposed to rising above $4; the latter would take a great deal of the wind out of the sails of consumer spending. Similarly, modest additional subprime mortgage / credit defaults are likely to be absorbed by the market; a large body of defaults would pose a more-formidable hurdle.