Granted, the global economy certainly seems like its close to recession territory, with no help from international tensions — just wondering if our measurements are losing their viability. Even Jay Powell cast doubt on the Phillips curve recently.
That's true. But the value of manufacturing doesn't necessarily come from its total share of the economy, as much as it does from its fast responsiveness.
Many services, both on the business and consumer sides, tend to be locked in for fixed contact terms. They also tend to be lumpy, either you buy the service or you don't. In contrast, most goods are purchased on-demand at the time they're needed. And it's easier to cut back gradually over time, by purchasing smaller quantities.
Think of the difference between Netflix and Amazon. Netflix is purchased in monthly increments. It's also all-or-nothing. If a household's belt-tightening they might not cancel their streaming service until they're well into the contraction. In contrast they'll probably immediately dial back how much plastic crap they're ordering from Amazon almost immediately.
So, even if manufacturing was only 1% of the overall economy, the high and fast responsiveness of its output to economic conditions makes it a good canary in the coal mine for the rest of the economy.
We don't normally look at agricultural indicators like crop yields, arable crop land, rainfall, food prices, and commodity futures because agriculture's a small but critical part of the economy. In modern developed economies, under 5% of the population is employed in farming. So while soybean tariffs may be tragic for soybean farmers, they have little effect on the broader market, just as Bitcoin price crashes may have tragic effects on Bitcoin miners but the broader economy doesn't care. The assumption is that we have enough food, and as long as we continue having enough, metrics about how much food we produce aren't that important for measuring the overall health of economy. This despite those metrics being a critical factor in human population growth for millenia.
Manufacturing is rapidly attaining the same status. We will continue to need stuff for the foreseeable future. However, as long as we have enough stuff, how manufacturers do is not terribly important to the broader economy, because they're a rapidly shrinking source of total spending. In many cases, when they're struggling it's because there's too much stuff and they can't find buyers for their products.
Not just that, but relatively few people (at least in the US; this might be different for other "developed" nations, and is probably very different for "developing" countries) are exposed to the agricultural sector on a day-to-day basis (even in rural parts of the US, for example), which means they probably don't have the intuitive understanding of the agricultural sector necessary to determine whether or not it's doing well. Most people in the financial sector (I'd assume, and have observed) tend to live and work as far from farms as possible :)
Agriculture's also pretty unlikely to be a useful indicator of recession (I'd imagine; I'm no economist) because people need to eat; whether you're eating a meal at a restaurant or a meal you cooked yourself, or whether you're buying fresh or frozen/canned, the underlying agricultural side of that supply chain is gonna be more-or-less unaffected (at least by the supply/demand curve jumbling; loan availability, real estate values, etc. can still negatively impact the ag sector in the same ways they negatively impact other sectors), if not moreso given the typical amount of land required to do farming/ranching at the scale necessary to make decent money from it (so i.e. excluding subsistence and/or recreational/hobbyist farmers).
(1) if it’s a small but critical part of the economy, could it make sense for it to switch to a centralised model?
(2) what happens when we have “enough” services?
2) The economy shifts into the next phase of development. I don't know what that'll be - artistic pursuits? space exploration? - but eventually the service industry will face the same fate as manufacturing and agriculture, and we'll move into a new economic era.
Perhaps artistic pursuits in space :)
Humans don't take boredom well. They'll find something to do even after all their needs are fully met.
2) we'll do something else
2) what “something” is neither primary production, nor manufacturing, nor services, yet capable of being scarce in a way that could be meaningfully traded for the aforementioned?
Powell mentioned the Phillips curve because it's been borderline irrelevant for a while now due to unorthodox global central bank policies.
> lose their signaling status due to a more service based economy?
There was a comic about (sorry, no translation this time...cos -there was another comic about translation P-: )
Is there a reason why the dip in 2016 isn't considered a recession, but this dip is?
The author’s thesis is that mistaken protectionist policies that affect trade are not in the interest of business and the economy. I don’t know that we can conclude that, as changes in policy tend to create new opportunities for businesses, both entrenched and new. The same cannot be said for policy that is continuous and non-changing.
As for now, it's to early to call. It takes time trip measure GDP; the author's opinion is that, when the data will come out, it will show that we entered a recession.
Basically every year there are fears of recession.
Not if you're an economist. We have some standard indicators to gauge economic growth, and those years you mentioned looked fine according to most indicators.
The "economists don't know what they're doing" trope is overused. Economists are always wrong, but they still have a track record of being less wrong than everyone else.
We've basically built our entire global economy on the idea that externalities don't matter. Recently, I came across this (https://www.sciencedaily.com/releases/2019/08/190808115117.h...) - between 1970 and 2012 there has been an 88% decline in large vertebrates (ie fish). We already know that plastic is poisonous, our entire economy is run on fossil fuels, etc. We've got less than ten years to completely change how the entire planet operates socially or we'll just cook to death. How likely is that?
It's gotten to the point where I'm walking down the street and the cognitive dissonance is just unshakeable. What are people working so hard for, accumulating so much "wealth" for, when the idea that anyone is ever going to retire is laughable? How are people doing anything that involves a time horizon of more than 5 years?
The recent shooters are evil sad people, but I understand. The world is terrifying and it's driving everyone crazy. I just don't know how people are coping.
Still, there's reason for hope. Many people care very strongly about saving the planet/biosphere, new businesses and research are cropping up all the time in this space. By the time 2050 rolls around, we very well may have technical solutions to some of our pressing environmental issues that seem to be killers now. Just consider 2019 -> 2050, that's 31 years. Back in 1988, wind and solar were a dream, EVs were nonexistent outside the golf course, and very very few people were passionate about fighting climate change.
Also, climate change doesn't have to hit your area specifically to be harmful. Crop failures will lead to wars and displaced people. Water shortages in India lead to angry people that want to fight over Kashmir, increased migration from climate affected areas to richer areas cause ethnic tension (from North Africa to Europe, from South America to the US). As an aside, clearly the policies of nationalists are abhorrent, but they don't occur in a vacuum, and, in the US at least, the left hasn't provided a clear path to a solution to this issue.
Here's the CIA being worried about such things (https://insideclimatenews.org/news/30012019/worldwide-threat...).
Yes, this is very doom and gloom. The facts are gloomy and connecting the dots on our possible futures spells out, in all likelihood, doom. How can you not see this?
I’d rather be on the side of the border that’s angry about the immigrants than the side of the border the immigrants are fleeing from.
Perhaps in the days of tomorrow, we will once again be in the mercy of Nature? Of course not, as long as we retain our technologies. Ergo, even if you (and I agree) don't think climate change will doom humanity as a whole, I'd still be sympathetic to rational campaigns reducing it's effects.
Um, what? On what are you basing this likelihood on? These are scientists that study this for a living. This sounds like complete fabrication.
All it takes is one asteroid to invalidate all the predictions. Or one war. Or one biological contagion. Or one technological innovation.
Indeed. We'll just get to deal with a rehash of the anti-immigrant rhetoric we're seeing now thanks to a refugee crisis our policies and consumption rates created.
You're listening too much to alarmist stuff. Things may get bad. It's not likely to be the collapse of civilization. Make sure you're able to survive the continuation of civilization, since that's the much more likely scenario.
I highly doubt we're going to get past 2050 without the foundations of society collapsing.
Second: Things look ugly right now. You'd have to be blind not to see it. But the advantage of being 57 instead of 18 is that I've seen this before, and I've talked to people who've seen even more. I don't know that this looks blacker than the 1980s, when nuclear war looked like a very real possibility - not just sometime in the future, but tomorrow. I'm not sure it's blacker than the Cuban Missile Crisis. I'm not sure that it's blacker than World War II, especially for those living in Europe, Russia, or China. I'm not sure that it's blacker than the Great Depression, when it looked like society - or at least the economy - had broken permanently.
Yes, it looks bad. It is bad. It's not worse than it's ever been, though. We probably will make it through this, though it will be a bumpy ride.
There's two ways to try to analyze this. One is to look from a 2019-centric perspective, where we know that nuclear war didn't cause the collapse of civilization, but we don't know whether climate change will. From that perspective, "might" looks worse than "definitely didn't". But I think that's kind of an unfair comparison.
The other way to try to compare is to look at how likely it looked when you didn't know the outcome. That's kind of subjective, so I can't really argue with your opinion if you're evaluating things the second way. To me, though, having been in both places, the 1980s frightened me considerably more.
(There may be a stage-of-life thing, too. I was 18 in 1980. Maybe the danger that you see around that age is the danger that you fear the most.)
Anyway, those are just some thoughts. I can't prove you wrong... but I sure hope you are.
Not these days.
The real fallacy in this headline is the idea that any measure of how well the world is doing, financially, could have at any time recently been adequate.
Yup - poverty has been dropping worldwide over the last 30 years and billions have been lifted out of poverty. These are the good times.
What is your motivation for this?
By most measures, the global economy is in the midst of the deepest slowdown since 2015, and in many cases since 2009.
The author goes on to explain that:
the problem has stemmed from trade policy, which has turned sharply protectionist and attempted to remake global supply chains.
Yes, things are changing, and like pouring antiseptic ointment on a burn, it can sting a little. The turning of a big ship takes time, longer than it took to create this article and make it seem we are off-course.
I just finished reading a book about the life of Laura Ingalls Wilder, who lived through something like 6 different depressions. Given the historic rates of inflation, innovation, and globalization, I don't really think the stock market is a bad bet IF you're willing and able to play the long game. The 20-30 years game. Get more conservative as you get older. Yes, still possible to get screwed, but it's one of many ways to keep options open.
That's going to happen when the funds go through a sell-off. They know it too, which is why they're trading despite the indicators, because they're more plugged into the market info that will let them get off right before the cliff.
Unless you're day trading, individuals should be trimming right now and increasing cash holdings, because the indicators available point to the sell off coming. You're welcome to try to run with the fund herd but they're better equipped and do it full time, meaning you'll be struggling to keep up with them. Better to get in front of the funds than chase them.