If you were getting bored by the never ending budget process, a flurry of colorful metaphors by “Fightin” Sen. Scott Wagner of York County added a more circus like element to the standoff. I just wanted to highlight an interesting argument in the Senator’s letter to Capitolwire about the current state of the economy. According to the Senator:
“I have been a private sector business owner for over 35 years and I can smell that a recession is beginning to develop”
Interesting, I always assumed that a dulled sense of smell was a key ingredient to a successful career in waste management, but then again I also never thought to smell a recession.
Predicting recessions or unending prosperity is a perilous business mostly because the predictions almost always turn out to be wrong. So mark your calendar - the Senator says a recession is developing. Let’s come back in six months and see how that turns out.
Now what might be bothering the Senator?
One of the few people to see the housing bubble, Dean Baker explains:
“For those who closely follow financial markets the first two weeks of 2016 have been the most fun since the financial crisis triggered by the collapse of the housing bubble. The market has lost more than 10 percent of its value since its late December peak, destroying more than $2 trillion of stock wealth…The fundamentals are not strong, but the economy is also not about to fall into another recession. The basic story is the one we were seeing before all the fun on Wall Street, we are looking at an economy that is growing slowly and still has not come close to recovering from the last recession. The rollercoaster ride on Wall Street has little effect on this picture.”
The Pennsylvania economy, like the national economy, is growing slowly. Job growth through November of 2015 is slower than in 2014 thanks to a bad year for durable goods. Specifically mining, construction and manufacturing all shed jobs through November. Is this a recession? Unlikely, but like I said, we will come back in six months and know much better. So stay tuned.
Now the Senator's prediction does provide a new interpretation of the state budget policies he favors -- more spending cuts which would drag Pennsylvania back to the bottom of the job growth rankings. So even if Wagner's prediction of recession turns out wrong for the nation, another state budget with deep cuts in spending like Gov. Tom Corbett’s first budget would most certainly deal a body blow to the Pennsylvania economy.