UBS Global Wealth Management has raised the likelihood of an economic recession in the United States to 25% from 20%, following concerns arising from slower job growth and July unemployment data that raised fears of a recession.
UBS in one of its notes on Monday maintained its basic argument that the economy will reach a soft landing with consumer spending broadly determining the direction of growth; however, it illustrates that the view is still vague (not a definite expectation).
Earlier this month, J.P. Morgan raised the probability of an economic recession in the United States by the end of the year to 35% citing easing labor market pressures, while Goldman Sachs lowered the probability of a recession in the next 12 months to 20%.
Last week, the US Department of Labor lowered its estimate for total jobs by 818,000 for the period from April 2023 to March 2024, meaning that US employers have added far fewer jobs than originally reported in the year to March.
This comes shortly after the US jobless rate jumped to a near three-year high of 4.3% in July amid a sharp slowdown in hiring, raising concerns that the job market is deteriorating and potentially leaving the economy vulnerable to recession.
Expectations for a rate cut of up to 50 basis points at the US Federal Reserve's September meeting have risen, with Chairman Jerome Powell signaling in his Jackson Hole speech last Friday that 'the time has come' to cut rates.
With excess savings built up during the pandemic being used up, "sustained income growth will be critical to keep spending up, as a stable savings rate is probably the best we can hope for," said Brian Rose, senior US economist at UBS.
