Recession worries ramped up last week when the yield on 10-year Treasury bonds fell below that of three-month notes. This sort of an “inversion event” has been a reliable warning sign of a coming downturn over the past six decades.

The stock market reacted accordingly but has steadied this week. Still, the latest survey by the National Association of Business Economics is downbeat looking at the next two years. The Federal Reserve is concerned enough that it signaled no additional interest-rate increases in 2019.

Look, nobody has repealed the business cycle and this is an elderly expansion — the second longest in modern record-keeping. So it doesn’t take a Ph.D. in economics to expect a recession in the next two years.

The question is, what kind of recession?

The kind of modest downturns seen during the Great Moderation from the mid-1980s until 2008 is one thing. Although they caused pain, it was generally short in duration, then the economy moved back to its path of decent growth and low inflation.

The Great Recession might be a once-in-several-decades event. Now, we don’t have a debt overhang on the level of the mid-2000s or the sickness in the financial sector. But we also lack some of the moderating factors of the Great Moderation.

One big change is the Trump administration’s focus on tariffs compared with previous administrations that sought to continue expanding trade and lowering tariffs through trade agreements.


The international landscape is different, too. Britain is continuing on a stumbling exit from the European Union, something at best promising slower growth in the U.K. A “hard Brexit” divorce could reverberate far beyond, disrupting banking, supply chains and trade.

Europe itself is pulling apart — authoritarian governments near or in place in Turkey, Hungary and Poland. Even Italy is governed by an illiberal Euroskeptic coalition.

Whatever the political appeal for some of such nationalism, it’s guaranteed to be a drag on the world economy.

Meanwhile, growth is slowing in China. This is yet another difference between now and the moderation era.

The result might mean a tougher, slower recovery. And that’s based on a modest downturn. If it’s worse, if it strikes deep into a key sector such as banking, we confront the question of whether the Fed has the tools to combat a crisis.

The central bank would be the lender of last resort, preventing a banking collapse.


But the benchmark effective federal funds rate is only 2.4 percent. Compare that with nearly 5.3 percent in 2007 and 6.5 percent in 2000. In other words, the Fed today has less room to employ a rate-cutting rescue if faced with a downturn.

Seattle would be in better shape than most — the superstar cities wouldn’t lose their position in a recession. (Unless that contraction was focused in tech … )

Even so, the diverse sectors of the metropolitan area’s economy would see business fall and layoffs would result. Construction would stop or slow, a big hit to city coffers. All sorts of plans would be delayed or buried.

But if the folk wisdom is true, validated in the 2009 unpleasantness, national recessions arrive here later than most places.

Economy Notes:

• Trump administration tariffs produced mixed results on Washington trade last year, according to new census data. Merchandise exports totaled $77.7 billion compared with $76.4 billion in 2017. However, exports to China, the biggest tariff target, declined to $16 billion, from nearly $18 billion the previous year. China is Washington’s biggest export customer.

• Washington’s gross domestic product expanded 4.7 percent in 2017, the fastest growth of any state. This is one of many data points in the latest Labor Market and Economic Report from the state Employment Security Department. It also contains information for the first three quarters of 2018.

• Tourism was strong last year. Nearly 41 million visitors came to Seattle and King County, according to Visit Seattle, the regional marketing association. That was up 2.5 percent from 2017. Spending totaled $7.8 billion, up 5.8 percent.