Concerns about an impending economic calamity peaked Aug. 14 when a reliable recession indicator flashed red — but despite the mounting headwinds, the U.S. business climate remains strong, according to a new report published by Citizens Bank.
Even as the longest economic expansion on record enters its eleventh year, companies in the U.S. remain in high-growth mode, according to the Citizens Business Conditions Index, which is based on corporate and public data about business growth and employment across the country.
The nationwide index sits at a healthy 61.2, down slightly from 61.5 in the first quarter of the year, the report found. That means despite concerns that the expansion could be petering out, U.S. companies remain broadly in a growth mode, powered by steady fundamentals, including revenue, manufacturing volumes and wages.
“There is a growing sense of uncertainty about a range of factors including trade, Fed rates, Brexit and the election, just to name a few,” said Tony Bedikian, head of global markets for Citizens Commercial Banking. “Businesses should seize every opportunity to assess the economic landscape and make informed decisions on how to hedge their risks.”
In July, the U.S. economy added a solid 164,000 jobs — a fairly unnoteworthy number, but evidence that the record-long economic expansion is continuing to chug along at a healthy pace. The unemployment rate remained steady at 3.7 percent, near a 50-year-low, while average hourly earnings have increased by 3.2 percent (falling short of expectations).
But recession fears escalated 12 days ago when 2-year Treasury note yields fell below 10-year yields, an occurrence that’s preceded every single recession for the past 50 years. The stock market plummeted after the spread between the two yields turned negative.
The yield curve inverted again last week after China and the U.S. ramped up tariffs on each other and Federal Reserve Chair Jerome Powell said he would "act as appropriate" to continue U.S. economic expansion.
Of course, the yield curve inversion isn’t the only indicator of an impending recession. Other telltale signs, like consumer confidence and the labor market, remain fairly resilient.