Will a recession happen in the United States within the next 12 months? The risks of one unfolding has hit a new high amid May’s weak employment numbers, says one of the world’s largest financial institutions.
According to JPMorgan’s Jesse Edgerton, the probability of a recession taking place between now and next June has jumped from 30 percent last month to 36 percent today. The analysts looked at a number of factors, such as consumer sentiment, manufacturing sentiment, building permits, auto sales and unemployment.
“Our preferred macroeconomic indicator of the probability that a recession begins within 12 months has moved up from 30% on May 5 to 34% last week to 36% today,” Edgerton wrote. “This marks the second consecutive week that the tracker has reached a new high for the expansion.”
The bank adds that the non-farm payrolls number isn’t an indicator in its forecasting model, though the jobless rate is. It’s noted by the bank that the lower the unemployment number is the more ominous it can be.
“The unemployment rate enters the model in two ways,” Edgerton told Yahoo Finance. “As a near-term indicator, we watch for increases in the unemployment rate that occur near the beginning of recessions. So this morning’s move down in the unemployment rate lowered the recession probability in our near-term model. But we also find the level of the unemployment rate to be one of the most useful indicators of medium-term recession risk. So the move down in unemployment raises the model’s view of the risk of economic overheating in the medium run and raises the ‘background risk’ of recession.”
Last week, the U.S. Bureau of Labor Statistics (BLS) reported that just 38,000 jobs were added last month, which is far below what economists had projected: 160,000. The unemployment rate dipped from five percent in April to 4.7 percent in May, which is because more than 458,000 workers had exited the labor force.
This has Newsmax‘s Dr. Edward Yardeni asking the question: is the employment situation in the U.S. a shortage of jobs or workers?
Rabelrouser says
Yes its coming, and will continue to get worse with time.
Be Prepared to support yourself and make do with what you have.