US economic recession concerns are 'completely misguided': Douglas Holtz-Eakin

By U.S. EconomyFOXBusiness

Douglas Holtz-Eakin: There’s no reason to expect a recession in 2019

Former CBO Director Douglas Holtz-Eakin discusses the December jobs report and why he doesn't expect an economic recession in 2019.

Former Congressional Budget Officer Director Douglas Holtz-Eakin on Friday rejected the notion that the U.S. economy is headed toward a recession, despite a weak end to 2018 that saw the Dow Jones Industrial Average and the S&P 500 post their worst December since the Great Depression.

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“I think the pessimism about a recession in 2019 is completely misplaced,” Holtz-Eakin said during an interview on “WSJ at Large with Gerry Baker.” “You cannot get a recession in the United States without having the household sector go south, and there is no reason for a very strong household sector to somehow pull back that sharply.”

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U.S. stocks, which declined in 2018, had the worst annual performance since 2008 as concerns related to a partial government shutdown, President Trump’s ongoing bashing of the Fed and various global trade conflicts, especially with China, stoked extreme market volatility. However, markets rallied on Friday with the release of the latest U.S. jobs report, which saw the economy add 312,000 new jobs in December and a 3.2 percent jump in annual wages.

Holtz-Eakin, who served as CBO director under former President George W. Bush, said the economy’s fundamentals remain strong despite market volatility, noting that payrolls increased by a rate of roughly seven percent over the last three months.

“That's a strong foundation for income and we should see continued momentum into 2019, no question about it,” he added.

Trump administration officials have remained optimistic about the state of the economy in recent weeks despite myriad concerns. The U.S. and China have yet to negotiate a deal to end a lengthy trade war, and Trump has repeatedly threatened to fire Fed Chairman Jerome Powell if he sticks to a plan to gradually raise interest rates to combat inflation.

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The president downplayed the market’s poor performance in comments earlier this week, referring to the recent drop as a “glitch” that would correct when the U.S. completes global trade deals. White House economic adviser Larry Kudlow also dismissed concerns that the U.S. economy was headed toward a recession in comments after Friday’s jobs report, telling FOX Business that critics should “reconsider their pessimism.”

Holtz-Eakin said U.S. markets are adjusting to the Fed’s interest rate hikes and turbulence related to Trump’s international economic policies.

“Will the economy ultimately slow? Yes, it's inevitably going to slow and the only question is, toward what? Will we go back to 2 percent? Will we go back to maybe 2.5 percent?  That would be a fantastic long run trend.  That's the real issue, it's not a recession, it's what will the slowdown look like?” he said.

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