Recession Panic May Have Passed. But the Economy Is Still at Risk.

For one brief, terrifying moment this summer, the word “recession” was on everyone’s lips — the stuff of television segments, front-page articles and Google searches.

Then, just as abruptly, everything started to look pretty much fine.

The trade war with China went into another of its periodic phases of de-escalation, as the Trump administration seemed rattled about the possibility of a faltering economy. The Federal Reserve cut interest rates twice, something of an insurance policy against a recession. Much of the data on the economy, particularly on the job market and the service sector, remained quite solid.

And the proximate cause of many of those August recession warnings, a sharp drop in longer-term interest rates and a yield curve inversion, was partly reversed.

Crisis averted! That, anyway, has been the mood in financial markets in the last few weeks, as stocks have remained near record highs and the fearful tenor of economic commentary has subsided.

But it would be premature to declare a clean bill of health. Public attention may be focused on an impeachment battle in Washington, but the underlying forces that drove recession fears in the summer are still very much here — with some new ones potentially in play.

The latest, starkest reminder was a new manufacturing number published Tuesday. It showed the sector was contracting in September at its fastest rate since 2009. That might have been dragged down in part by a strike at General Motors, but the softness in the factory sector is evident in other data that predates the strike.

For example, in the last six months, the manufacturing industry in the United States has added an average of only 3,000 jobs a month, down from 25,000 a month as recently as the spring of 2018. (The Labor Department will release the latest employment numbers Friday.)

A less noticed piece of data on Friday showed that manufacturing wasn’t the only pocket of weakness.

Spending on nonresidential construction fell 0.4 percent in August, the latest indication that businesses are not investing in new warehouses, factories and office buildings at the rate they were a few months ago.

There is a tendency to think of the economic angst caused by the trade wars as resembling a light switch — something that President Trump can turn on and off. Some even think of it as a “Trump Put,” referring to a financial contract that insures against big losses. That is, there’s an assumption that the administration will ease trade tensions if they start to affect the stock market or the economy too negatively.

As the last few weeks have shown, there’s some truth to that. The spike in recession fears in August seemed to bring a more conciliatory tone from the Trump administration, even if concrete progress in trade negotiations isn’t really in evidence.

But the $20 trillion United States economy is a slow-moving beast, and just as the trade rift between the world’s two largest economies didn’t cause a major disruption overnight, neither do a few conciliatory comments make everything O.K.

We are only starting to see the delayed economic impact of a series of trade escalations over the summer and of a slowdown in the global economy. It’s starting to show up in hiring and capital-spending plans, as the latest numbers demonstrate.

For some time, close watchers of federal policy have been urging businesses to think of the trade disruptions not as one-off headlines, but as the continuing cost of doing business globally.

“This kind of goes to the advice we’re giving clients, and we’ve been trying to do this for a while, ‘no head-in-sand behavior here,’” said Scott McCandless, trade policy leader at the accounting firm PwC. “Be cleareyed about this. This will probably be around a while.”

There is reason to view the seemingly more optimistic signs being flashed by financial markets with skepticism.

The yield on 10-year Treasury bonds fell to 1.45 percent in early September from 2.07 percent in late July, an uncommonly sharp drop, before rebounding to 1.64 percent Tuesday. The big swings can be chalked up to global capital flows that aren’t necessarily reflective of the economic outlook in the United States.

But that doesn’t mean there is no signal in the noise. Lower long-term rates imply lower growth and inflation in the United States in the years ahead. While the bond markets are becoming more stable, yields are settling at levels consistent with an American economy that is growing more sluggishly than it has the last few years — albeit not at recession level.

Even after sharp drops Tuesday and Wednesday, the S&P 500 has remained not far from its record highs. But the market is often slow to reflect a shifting economic landscape. When the first rumblings of what would become the global financial crisis took place in August 2007, for example, the stock market actually peaked in October; the economy fell into recession that December.

“The lights haven’t gone out on the economic outlook yet, but they are certainly growing very dim,” said Chris Rupkey, chief financial economist of MUFG Union Bank, in a research note.

A recession is certainly not a foregone conclusion, and a period of slow growth still looks more likely than an outright contraction. But just because the recession talk is out of the headlines doesn’t mean all is well.

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