Finance Experts Say US Economy Faces Zero Growth but Recession Unlikely

24 Jan 2019

Fon Mathuros, Head of Media, World Economic Forum: Tel.: +41 (0)79 201 0211; Email:

· Zero growth in the US economy in 2019 is a serious risk if the government shutdown, trade war with China and Brexit are not resolved – but recession is unlikely

· Trump has not delivered on campaign promises about workers’ rights and resentment is building; the government shutdown is now putting air traffic at risk

· For more information about the Annual Meeting, visit

Davos-Klosters, Switzerland, 24 January 2019 – The failure to find ways out of the longest US Federal Government shutdown in history, the ongoing trade war with China and the UK’s Brexit impasse risk dragging the US economy down to zero growth in 2019 – but a recession is unlikely, according to finance experts debating the future of America’s economy at the World Economic Forum Annual Meeting.

“The shutdown, if it continues, will be very problematic,” said Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University, USA. “The estimate of zero growth is not crazy at all,” he added.

Brian T. Moynihan, Chairman and Chief Executive Officer of Bank of America Corporation, was more bullish, estimating growth at 1.9% for 2019. His evidence includes strong employment, solid consumer activity and business optimism that is running higher than two to three years ago. For those fearing a recession, he recommends keeping an eye on declines in consumer spending and capital commitments.

Market unease may be due to the fact that, from June 2009 to the present, we’ve seen almost the longest period of US growth since World War II, so people naturally think something’s got to go wrong, said David Rubenstein, Co-Founder and Co-Executive Chairman, Carlyle Group, one of the world’s largest investment firms. Rubenstein said he expects the trade war with China to be resolved in the next two to three months as both sides realize they need to make moves or suffer greater consequences. He also said he expects the shutdown to be resolved soon as Republicans and Democrats will both bear the blame the longer it drags on. However, “if we don’t resolve that [shutdown] in the reasonable future it will really impact the economy,” he added.

People should be wary of the $23 trillion of federal debt, maintained Rubenstein. Rogoff dismissed his concerns as a medium- to long-term problem, arguing that Republicans don’t think it matters as much as tax cuts and Democrats don’t think it matters as much as government spending. However, with the US borrowing $1.2 trillion of its annual $4.2 trillion budget, that cannot be sustained – especially if interest rates rise, argued Rubenstein: “At some point the markets will wake up and say they can’t tolerate it,” he said.

Meanwhile, resentment among US workers is growing as President Trump fails to deliver on his campaign pledges of fairer trade rules and stronger labour protections. The $3.2 trillion deficit in investment in infrastructure – the solution of which was supposed to deliver strong job growth – has not moved, according to Elizabeth Shuler, Secretary-Treasurer and Chief Financial Officer, American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), USA. “We see an uprising across the country,” she said, as companies like Amazon and Uber join a “race to the bottom” in terms of workers’ pay and rights.

In Los Angeles, 30,000 teachers are picketing for more pay and lower class sizes. The government shutdown has left 800,000 federal workers on furlough or working without pay. “If you heard what air traffic controllers and pilots are saying, you probably wouldn’t be flying back into the United States,” Shuler added, as essential manual checks on air traffic control systems go unperformed.

The World Economic Forum Annual Meeting brings together more than 3,000 global leaders from politics, government, civil society, academia, the arts and culture as well as the media. It engages some 50 heads of state and government, more than 300 ministerial-level government participants, and business representation at the chief executive officer and chair level. Convening under the theme, Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution, participants are focusing on new models for building sustainable and inclusive societies in a plurilateral world. For further information, please click here.

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