The current economic expansion, albeit slower than many in the past, has earned a record in longevity. That fact alone does not indicate an imminent recession. But it is worth asking, “What could be next?”

Economic trends can foretell a continued expansion or downturn, so it’s essential to monitor them. An excellent July 29, 2019, WSJ article looks at such trends and concludes storms are on the horizon.

Low interest rates are keeping the stock market and consumer economy chugging along, but early indicators like housing and business investment have turned down. Remember that economists, unlike umpires, make their calls well after the fact. Those downturn signals are troublesome, especially when coupled with a slowdown in Gross Domestic Product growth (2018 versus 2017 based on revised numbers and 2019: Q2 versus 2019: Q1). The expected drop in interest rates and continued growth in federal government deficit spending may stave off a downturn. But the continued trade war, international slowdown and uncertainty as we near a consequential election create a substantial offset.

The direction of inflation is also uncertain. Economists have been baffled at why we have such low inflation alongside today’s low unemployment. The relationship between the two measures (called The Phillips Curve) says prices should rise as unemployment falls. Why do we not see this relationship in today’s data? Despite record-low unemployment, inflation has been consistently below the Federal Reserve’s 2% target rate?

One explanation is that the labor force is far less taut than in the past at low unemployment rates. “New” workers taking today’s open jobs are actually former labor force dropouts, gig workers seeking steady jobs or other people working fewer hours than desired. Employed workers have less bargaining power as union membership declines. And quit-rates have flattened as economic uncertainty rises.

Another explanation comes from the producer side. Growing costs have not translated into equivalent price rises owing to two forces. One is excess supply in many markets. The other effect is increasing commoditization that makes it hard to earn a price premium.  (See another solid WSJ article in the July 29th issue on how store brands have taken share from traditional brands through lower pricing.)

As long as inflation remains below target, expect the Fed to stay expansive in its monetary policy (e.g., lowering rates or no longer selling bonds out of its vast store.) Deflation (as we’ve seen in Japan) creates stagnation no one welcomes.

We don’t know what’s going to happen with inflation or economic growth, but it’s likely that we’ll soon see changes. So consider your best actions under four scenarios:

• Recession with low inflation
• Slow growth with low inflation
• Slow growth with higher inflation
• Faster growth and higher inflation

What actions should you consider in those four scenarios? Which actions might you regret under certain scenarios? Which strategies are wise under all scenarios?

Also, think carefully about how you can better differentiate your offerings and shift investment from low-margin, low-growth commodity-like products to better engines of growth.

Wise leaders reallocate resources significantly leading into recessions in order to capture market share in the downturn and beyond.  Also, refine your value proposition if you compete in business-to-business markets: reducing risk, preserving cash, lowering costs, and enhancing customer agility matter more than helping customers grow.

If you operate in consumer markets, can you make your product a necessary purchase, versus an easy-to-delay decision?  For example, during a previous recession, a window-blind company positioned its products as a low-cost way to freshen a home when major remodels were unaffordable.

Lately, a Dylan song—The Times They Are A-Changin’—comes to mind as I think about the economy.