Trump Predicts “Massive Recession,” Economists Scratch Their Heads


Yesterday WDTLAY posted about Trump’s farcical promise to eliminate the national debt in his eight years as President. In that same interview in the Washington Post he predicted a “very massive recession.”

He cited high unemployment and an overvalued stock market as a “financial bubble,” with a serious recession looming. “First of all, we’re not at 5 percent unemployment. We’re at a number that’s probably into the twenties if you look at the real number,” he said in regard to the unemployment rate of 5% released by Bureau of Labor Statistics. A broader measure of unemployment that includes part time employees and those that have become discouraged and stopped looking for work is pegged at 9.8%.


The above graph, from the Bureau of Labor Statistics, shows that unemployment is approaching its pre-recession lows of 4.4%, though currently at 5%.

In an article at Huffington Post, Harm Bandholz, chief U.S. economist at UniCredit Research, said “We’re not heading for a recession, massive or minor, and the unemployment rate is not 20 percent.”

Many economists would agreed that the stock market may be in a period of slight overvaluation due to the recent rally. The market as a whole has been estimated to be 15% higher than its long term averages, but hardly a catastrophic overvaluation that Trump’s hyperbolic statements would suggest.

In an article at CNBC, Rajeen Dhawan, director of Economic Forecasting Center at Georgia State University, said “I cannot predict a stock market crash, so I cannot predict a recession. I don’t see any of the reasons for a recession going forward unless there is a huge problem with the market or there is some catastrophic world event which is beyond the scope of economics.”



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