The Next Recession

Knowing when were in one is easy; accurately predicting one is the hard part.

December 18, 2017

Bill Virgin

Financial and economic crisis. Recesion, Depression. Flip image horizontal when things get better.

This article appears in print in the December 2017 issue. Click here for a free subscription.

Whatever the official parameters for defining the onset of a recession, most people link the start of national and regional recessions to some specific triggering event the Black Tuesday stock market crash of 1929, the cancellation of the SST project in 1971, the peak of the dot-com boom in 2000, 9/11.

But theres no one event upon which consensus can congeal as to the start of the Great Recession of … 2007? 2008? 2009? The year 2008 was packed with the failure of mortgage companies, banks (including one local institution of some prominence) and a brokerage, and 2009 saw the bankruptcy filing of General Motors and more bank failures. But warnings that the housing bubble was deflating were loudly and widely sounded in 2007.

The turning of the calendar from 2017 to 2018, moving from the 10-year anniversary of the Great Recessions launch into the, um, 10th anniversary of the start of the Great Recession, provides an opportunity to assess the economic landscape and indulge in a bit of pattern recognition as in, what signals should we be picking up as to the condition and direction of the economy?

What were specifically looking for are signs of the Next Recession, great, small or otherwise. It sounds like a straightforward exercise in economic analysis. Its not. Heres why.

Youll have no trouble picking up some unsettling parallels to past downturns: frothiness in housing prices and stock prices, concern about Boeing orders and employment, more concern about the tech sector and the sustainability of its growth, and how Washingtons ag sector is doing.

The difficulties in applying those historical illustrations to contemporary conditions is that while recessions are consistent in their inevitability, their causes are anything but. The formula for causing an economy to bubble over and cool down, both in contributory ingredients and their proportions, is never the same. Tech was right in the thick of the downturn 17 years ago (hence the term dot-com bust) but it was largely a bystander to the Great Recession. Washington ag had some of its best years during the latter period. Aerospace did well, too.

Some regional recessions are self-inflicted see Boeing and tech-driven downturns while others show up here after having been triggered somewhere else. Washington wasnt innocent of the sorts of malpractice that fueled the housing-finance-and-construction recession, but its participation was more effect than cause. Cant pin that one on us, not much of it anyway (Washington Mutual excepted).

Want more complications? Some industries go through cycles unrelated to the rest of the economy (although if the calamity is big enough it can taint other sectors, regions and even the national economy). Retail would be in trouble even if the economy were booming, because its going through a restructuring likely to leave it permanently altered. Tech is building its current boom on such technologies as artificial intelligence and cloud computing, which sounds like a firmer foundation than social media or online retailing, but if those technologies fail to deliver and interest fades, the latest generation of tech employees will get to experience what an industrywide contraction looks like.

One more factor to make trend analysis a pain: In order to know when a recession begins or ends, you need to know when the recovery began or ended. For some industries and regions, the recovery has been so tepid as to leave the impression there wasnt one. But recoveries come in their own variety of flavors and strengths; their end is predictable, but the timing and cause arent. Around here, 2018 is likely to be a year of heightened vigilance for that one unmistakable sign that the recession is upon us. And we may well find it a half decade or so after it might have been of some use.

Bill Virgin is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News. Reach him at

This article appears in print in the December 2017 issue. Click here for a free subscription.