JPMorgan Raises Recession Odds Amidst Easing Labor Market Pressures

JPMorgan Economists’ New Assessment

JPMorgan Chase analysts have raised their estimate of the likelihood of a recession in the US economy by the end of the year, citing easing labor market pressures. In a note to clients, economists led by Bruce Kasman increased the odds of a recession to 35%, up from their previous estimate of 25%. The team still sees a 45% chance of a recession in the second half of 2025.

Labor Market Signals

The economists pointed to slowing wage inflation and easing labor market conditions as key factors in their revised assessment. They noted that US wage inflation is now slowing in a manner not seen in other developed market economies, and that easing labor market conditions increase confidence that service price inflation will move lower and that the Fed’s current policy stance is restrictive.

Interest Rate Cuts on the Horizon

JPMorgan expects the Federal Reserve to cut interest rates twice this year, in September and November, as inflation eases. The analysts lowered the odds that the Fed keeps interest rates higher for longer to just 30%. This move is seen as a response to the recent decline in inflation and a potential slowdown in economic growth.

Implications for the Market

The revised recession forecast and expected interest rate cuts are likely to have significant implications for the market. Investors are already grappling with the impact of a potential recession, and the news is likely to lead to increased volatility in the coming weeks. As the economy continues to slow, investors will be watching closely for signs of a recession, and any potential impact on interest rates and the market.

Labor Market Signals Show US Economy Heading for a Recession

Disappointing Jobs Report Triggers Recession Fears

The US economy’s labor market is sending warning signs that a recession may be on the horizon. A disappointing jobs report released last week showed that total nonfarm payrolls grew by just 114,000 in July, well below expectations. The report also revealed that the unemployment rate unexpectedly jumped to 4.3%, triggering fears of a slowdown in economic growth.

The Sahm Rule and its Implications

The disappointing jobs report reignited fears of a recession, as it triggered the so-called Sahm Rule. The rule stipulates that a recession is likely when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low. Over the past three months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023.

Analysts Weigh in on the Implications

Macromavens President Stephanie Pomboy believes that the labor market is sending a clear signal that the US economy is heading for a recession. “Middle America has been in recession for a long time,” she said. “And again, Wall Street has kind of ignored it. But I think that’s all starting to catch up now.” Pomboy also noted that the employment data is crucial in determining the fate of the economy, and that next week’s inflation measures and retail sales data will be key in assessing the outlook for the consumer.

Investors on Edge as Recession Fears Mount

The disappointing jobs report and the potential implications of a recession have sent investors into a state of uncertainty. As the economy continues to slow, investors will be watching closely for signs of a recession, and any potential impact on interest rates and the market. The coming weeks will be crucial in determining the fate of the US economy, and investors are holding their breath as the situation unfolds.

Interest Rate Cuts Expected as Inflation Eases

JPMorgan Expects Rate Cuts in September and November

JPMorgan Chase analysts expect the Federal Reserve to cut interest rates twice this year, in September and November, as inflation eases. The analysts lowered the odds that the Fed keeps interest rates higher for longer to just 30%. This move is seen as a response to the recent decline in inflation and a potential slowdown in economic growth.

Impact on the Market

The expected interest rate cuts are likely to have a significant impact on the market. With interest rates expected to decrease, investors may become more confident in the economy, leading to increased buying activity in the stock market. However, a decrease in interest rates may also lead to increased borrowing and spending, which could potentially fuel inflation.

Recent Inflation Data Suggests Rate Cuts

Recent inflation data suggests that the economy is experiencing a slowdown in inflation. The July jobs report showed that wage inflation is slowing, which is a key indicator of inflation. Additionally, the recent decline in the personal consumption expenditures (PCE) price index suggests that inflation is easing.

Implications for Investors

The expected interest rate cuts have significant implications for investors. With interest rates expected to decrease, investors may see opportunities to invest in riskier assets such as stocks. However, investors should also be aware of the potential risks associated with interest rate cuts, including increased borrowing and spending, which could potentially fuel inflation.

Investors are advised to closely monitor the market and adjust their investment strategies accordingly. As the economy continues to slow, investors will be watching closely for signs of a recession, and any potential impact on interest rates and the market.

Analysts Warn of a “Reckoning” for the Markets

Macromavens President Sees Pain Ahead for the Economy and Markets

Macromavens President Stephanie Pomboy believes that the US economy is heading for a “reckoning” that will have significant implications for the markets. In an interview, Pomboy stated that “there’s a lot of pain ahead of us, both for the economy and this reckoning for the markets that have been really behind the curve, like the Fed.”

The Labor Market is Sending a Clear Signal

Pomboy believes that the labor market is sending a clear signal that the US economy is slowing down. She noted that “middle America has been in recession for a long time” and that the recent jobs report “really focused attention in a way that Wall Street could no longer ignore.” Pomboy believes that the employment data is crucial in determining the fate of the economy, and that next week’s inflation measures and retail sales data will be key in assessing the outlook for the consumer.

The Market is Ignoring the Signs

Pomboy believes that the market is ignoring the signs of a slowing economy, and that this will have significant consequences. She stated that “the payroll report really focused attention in a way that Wall Street could no longer ignore,” but that the market is still not fully acknowledging the risks.

The Data Will Be the Tail That Wags the Market Dog

Pomboy believes that the data will be the key driver of the market’s behavior in the coming weeks. She stated that “I think this is indicative of what we’re heading into, which is the data. It’s going to be the tail wagging the market dog, as it should be.”

Jamie Dimon Cautions Against False Sense of Security

JPMorgan CEO Warns of Potential Disruptions to the Economy

JPMorgan Chase CEO Jamie Dimon is cautioning against a false sense of security regarding the US economy. While many experts believe that the economy will experience a “soft landing,” Dimon is not convinced that this is the case. He stated that “there’s a lot of pain ahead of us, both for the economy and this reckoning for the markets that have been really behind the curve, like the Fed.”

Dimon Disagrees with the “Goldilocks” Theory

Dimon disagrees with the “Goldilocks” theory, which suggests that the economy is experiencing a perfect balance of growth, inflation, and interest rates. He believes that this theory is overly optimistic and that the economy is at risk of experiencing a downturn. Dimon pointed out that the extra money that consumers received during the COVID-19 pandemic is starting to run out, which could have a negative impact on consumer spending.

Wharton Professor Emrys Siegel Also Warns of a Downturn

Wharton professor emeritus Jeremy Siegel also believes that the economy is at risk of experiencing a downturn. He stated that “the data is not too strong to encourage the Federal Reserve to tighten, and certainly not too weak to start a slowdown in corporate profits.” Siegel’s comments are a warning that the economy is at a critical juncture and that policymakers need to be prepared to take action to mitigate any potential downturn.

Dimon’s Comments Spark Debate

Dimon’s comments have sparked a debate among economists and policymakers about the future of the US economy. While some experts believe that the economy will continue to grow, others are more cautious and believe that a downturn is possible. As the debate continues, investors and policymakers will be watching closely for any signs of a downturn.