With trade wars and instability from South Dakota farmers, there has been a lot of chatter about a recession on the horizon. While economists and financial experts hypothesize about what’s next, actually seeing a recession coming isn’t always easy.
There’s been a lot of talk about recessions lately…so, what is a recession?The definition is pretty straightforward.
“Recession is when the entire economy doesn’t produce as much as it did in the previous year,” Nef Family Chair of Political Economy at Augustana University and Author, Robert Wright said.
It seems simple? The problem is, we typically don’t know we’re heading toward a recession until it’s already hit.
Author and professor of economics at Augustana University, Robert Wright, says enough conversation about the possibility of a recession can actually kick-start the process.
“How the economy is going to function next year is partly a function of decisions being made right now. Do we add a new reporter? Do we add a new professor? Do we add a new chef? Do we build a new production facility in the next year or not? Businesses are thinking, we can’t really take the risk at this point. It’s better to play it safe and see what happens. And that means it can become a self-fulfilling prophecy,” Wright said.
It’s not just worried executives creating the recipe for a recession.
“There are real things going on in the real economy. Like the Freight Index is showing real, red signals right now. It’s headed down. That means fewer goods are being transported in 18 wheelers, in trains, on airplanes. And that doesn’t bode well for the future,” Wright said.
“There’s a lot of challenges in the Ag sector. And there’s a lot more talk nationally, in terms of recessions. The probability of a recession is higher now than it was just a few months ago. We see a lot of volatility in financial markets. Just a lot more uncertainty,” South Dakota Department of Revenue Secretary Jim Terwillinger said.
Terwilliger, says the struggles of South Dakota farmers are only adding to the potential of an economic fall in the near future.
“Progressively, since really since February, the mood has been a little bit more pessimistic on the economic outlook. Specifically for not only nationally, but also here in South Dakota with some of the challenges we’ve had,” Terwilliger said.
Despite the warning signs and concerns, Wright says there is always the chance for a turnaraound.
In the meantime, people need to keep a close watch on their investments and be wise with their cash.
“For most people, you just ride it out. The stock market is going to go down, but later on it will go up again and you know, if you’re retiring in 10 years, 20 years, 30 years, this little blip isn’t something to concern yourself with,” Wright said.
Wright says there is also a possibility South Dakota could face another farm crisis, like we saw in the 1980s. However, that could also be turned around with the help of outside influences.