Now that the old rules governing macroeconomic cycles no longer seem to apply, it remains to be seen what might cause the next recession in the United States. But if recent history is our guide, the biggest threat stems not from the US Federal Reserve or any one sector of the economy, but rather from the White House.
CHICAGO – What could trigger a recession in the United States? In the past, a tightening labor market after a period of expansion served as an early warning sign. Workers would become more difficult to find, wages would start climbing, corporate profit margins would tend to shrink, and firms would start raising prices. Fearing inflation, the central bank would then raise interest rates, which in turn would depress corporate investment and spur layoffs.
CHICAGO – What could trigger a recession in the United States? In the past, a tightening labor market after a period of expansion served as an early warning sign. Workers would become more difficult to find, wages would start climbing, corporate profit margins would tend to shrink, and firms would start raising prices. Fearing inflation, the central bank would then raise interest rates, which in turn would depress corporate investment and spur layoffs.