As he cranks up his re-election campaign with historically low approval ratings, President Donald Trump plans to run on the economy and good numbers on employment and the stock market. But it appears he may instead be facing a recession to rival the one that struck in 2008.
One of the leading economic indicators for the overall health of the economy is something known as the gauge of business conditions, and Morgan Stanley, according to MarketWatch, is warning that the future doesn’t look bright:
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Morgan Stanley … said in a recent note that its proprietary Business Conditions Index, or MSBCI, fell 32 points last month, marking its sharpest collapse since the metric was formulated. The gauge touched its lowest point since the 2007-08 financial crisis. A separate composite business-condition index also fell by the most since 2008 and hit its lowest level since February of 2016.
One of the biggest drags on how business sees the future of the economy is the ongoing trade war between the U.S. and China, which makes it nearly impossible for CEOs to develop business strategies and has also forced many companies alter their supply chains.
The employment picture also looks extremely bad:
Morgan Stanley said that its index also reflects an apparent slowdown in domestic jobs growth. Economists for the report, led by Ellen Zentner, wrote that the fall in business conditions is “consistent with the slowdown in gross hirings reflected in the latest employment report for May, and raising the risk that weakness in labor demand persists into next month’s report.”
Indeed, the U.S. created just 75,000 new jobs in May, well off consensus forecast for some 185,000 jobs created on the month, and potentially marking a significant change of momentum in what has been a pillar of strength in the domestic economy.
Bottom line: Morgan Stanley expects business expansion to come to a screeching halt sometime this month.
Now imagine Trump trying to win re-election in the middle of a recession. George H.W. Bush was unable to do it, and he had just won a resounding victory over Iraq. The recession all but handed the 1992 election to Bill Clinton, who turned the economy around and even left a budget surplus after his eight years in office.
As unpopular as Trump is personally, a downturn in the economy could well seal his fate in 2020.
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