Fleet Management

FTR Conference: Expect 'Sauntering' Economy to Continue

September 13, 2017

By Evan Lockridge

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"Sometimes growing stronger is also the next thing that leads to the next recession," said Dr. Larry Davidson, professor emeritus of business economics and public policy at Indiana University’s Kelley School of Business. Photo: Evan Lockridge
"Sometimes growing stronger is also the next thing that leads to the next recession," said Dr. Larry Davidson, professor emeritus of business economics and public policy at Indiana University’s Kelley School of Business. Photo: Evan Lockridge

Both an optimistic and a slightly pessimistic view of the economy kicked off the annual FTR Transportation Conference in Indianapolis Wednesday morning.

“We seem to have taken on – lock, stock and barrel – a new story called secular stagnation,” said Dr. Larry Davidson, professor emeritus of business economics and public policy at Indiana University’s Kelley School of Business. “The story is this is the new economy, that we are going to have to put up with growth that’s like we’ve had recently.”

In other words, don’t expect the U.S. economy to pick up much steam over the annual growth that has been around 1.8% the past few years. Conversely, you shouldn’t have to worry much about it slamming on the brakes hard anytime soon, according to Davidson.

He presented a number of economic yardsticks, both positive and negative, including showing how gross domestic product growth in the U.S. has slowed compared to historically higher levels, for a pace Davidson described as “sauntering.”

While this may seem bad, it’s not, Davidson said. He pointed out that this slower pace of economic growth causes many to believe that a recession may be on the horizon. Yet the opposite is more likely true, he emphasized.

“One reason an economic recession happens is they come from shocks that no one anticipated,” he said. “It’s the economic environment conditions that are going to determine when the next recession comes.”

Such shocks can come from anywhere, he said, pointing as an example to the 1970s when the price of oil quadrupled in a very short time. For something more recent, think of the U.S. financial crisis, which hardly anyone expected, that resulted in the Great Recession.

While some economic indicators may be troublesome – such as reduced business investment, lower labor force participation, stagnant business productivity and an ever ballooning federal budget deficit – the U.S. and even the world are on the verge of many technological revolutions that are going to have long-lasting effects, much the same way the first cars and trucks have shaped the economy of today.

“We do want to get out of this secular stagnation. We do want things to grow stronger. But sometimes growing stronger is also the next thing that leads to the next recession,” Davidson said. “We should be confident this is a great country, with a great system with the flexibility to overcome any problems."

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