Whither the economy in 2020?

If you thought 2019 was an action packed year, stay tuned for 2020

By Morf Morford
Tacoma Daily Index

The Economist recently proclaimed that 2020 will be centered around “America’s ugly election and faltering economy”.  (1*)

The Economist goes on to say “Both will induce anxiety and each will influence the other. It will be a volatile year, characterised by unstable, angry and polarised politics, and an enfeebled economic outlook for the world, regardless of who wins”.

President Trump, The Economist says, “will be impresario of the election show, setting the terms on which the contest is fought and the tone with which it is conducted. He will brand whoever is his challenger as a dangerous socialist, bent on flooding America with immigrants and embarking on a radical far-left agenda that will enfeeble the country.”

When it comes to the economy, China has been slowing for a few years now, much of Europe is in, or on the verge of recession.

The effects of Brexit are only just beginning – but will have immense repercussions.

Mix in tariffs, trade wars and presidential edicts by Twitter and you have the mother of all feedback loops between politics and the economy.

Global financial markets and employment rates have looked good through 2019. Don’t expect the same in 2020.

America will continue to withdraw from international agreements and China, and a few others, are rushing in to fill the gap.

We, and political nerds around the world, will be pre-occupied by the twists and turns and ever-shifting nuances of the American electoral process.

Again, with Mr. Trump setting the tone and direction – and  always with an eye on the ratings – the election year 2020 will be the ultimate world-wide reality TV show.

With a whole new set of economic challenges that literally have never been seen before, the party is just beginning on what the next ten (or more) years will look like.

Boeing’s terrible, no good, very bad year

Boeing, as the single largest exporter from the US, directly contributes about half of one percent of our GDP. When they have a bad year, as they did in 2019 with airplane crashes, leadership shake-ups and loss of customer confidence, everyone notices – and the markets react.

To put it mildly, that’s a lot of heft for one industry, let alone one company. Even if Boeing does not lay off any workers directly,  the supply chain – the hundreds of vendors, suppliers and subcontractors will be impacted directly – if not permanently.

Boeing is notorious for its ups and downs, but this time is different – as Boeing falters, Airbus – and the emerging Chinese aircraft industry are ready to step in.  (2*)

What the world of work will look like in the next few years will hold little resemblance to the image of this children's book.

What the world of work will look like in the next few years will hold little resemblance to the image of this children’s book.

Student debt

For the first time ever, a generation educated, primed and ready for entrance into the job market and participation in the economy is hobbled by something few of us saw coming; student debt.

The statistics are mind-numbing and paralyzing.

Among the Class of 2018, 69% of college students took out student loans, graduating with an average debt of $29,800. Americans owe over $1.56 trillion in student loan debt, spread out among about 45 million borrowers. That’s about $521 billion more than the total U.S. credit card debt.

11.5% of student loans are 90 days or more delinquent or are in default.

65% of seniors graduating from public and nonprofit colleges in 2017 had student loan debt. The average monthly student loan payment is $393.

66% of graduates from public colleges had loans  with an average debt of $25,550. 75% of graduates from private nonprofit colleges had loans  with an average debt of $32,300.

Interest rates for private loans ran as a high as 14.24% in September 2018.  (3*)

Some academic areas have higher average levels of debt than others.

MBA = $42,000 (11% of graduate degrees)

Law = $140,616 (4%)

Medicine and health sciences = $161,772 (5%)

Other master’s degrees = $55,489 (15%)  (4*)

Long term debt is rarely a positive feature, but for nearly an entire generation, ready to invest in business, home or family, debt, like any investment has a leveraging affect on one’s life choices and possibilities.

Financial anxieties are the dominant cause of the decline of marriage in Japan.

Nearly 1 in 4 men and 1 in 7 women in Japan were yet to be married at age 50 in 2015.

People who have never married by age 50 hit a record 23.37 percent for men, up 3.23 percentage points from the previous survey in 2010, and a record 14.06 percent for women.

The figures were in sharp contrast with a 1970 survey that showed 1.70 percent of men and 3.33 percent of women had never married by that age.

To say that these trends, certainly not limited to Japan, will have long term consequences will become ever more obvious – and extreme – as time goes by.

Like Japan, Americans are marrying, and buying homes (if they can) many years later than previous generations.

The birth rate of 2019 matches the birth rate of literally a century before – 1919.  (5*)

How long this decline will continue – or even increase – is anyone’s guess, but I think it is obvious that as long as individual financial burdens preclude what were once foundational life choices, the prospects for the foreseeable future, in terms of families, and a stable economy, don’t look promising.

And how all this will impact the future cost of housing, the job market, the cost of living, the appeal of higher (or possibility) of higher education and the quality of life for future generations will be even more  unforeseeable.

Welcome to the third decade of the 21st Century.

 

(1*)    You can read the entire article here – https://www.economist.com/the-world-in/2019/12/25/buckle-up-for-americas-ugly-election-and-faltering-economy

(2*)    https://www.chinausfocus.com/finance-economy/the-future-of-chinas-aerospace-industry

(3*)    These statistics come from https://ticas.org/wp-content/uploads/legacy-files/pub_files/classof2017.pdf

(4*)    More statistics on graduate school student debt can be found here – https://static.newamerica.org/attachments/750-the-graduate-student-debt-review/GradStudentDebtReview-Delisle-Final.pdf

(5*)    https://www.foxbusiness.com/markets/americas-population-growth-historically-slow-as-birth-rate-plunges or https://www.cdc.gov/nchs/data/vsrr/vsrr-007-508.pdf