Claudia Thurm, chief economist at New Century Advisors, talks to “Varney & Company” about the Fed’s next interest rate move.
JPMorgan Chase analysts said U.S. Economy The economy will be in recession by the end of the year.
In an analyst note on Wednesday, JPMorgan economists led by Bruce Kassman raised the chance of a recession this year to 35% from 25% because labor market pressures are easing.
“U.S. wage inflation is currently slowing in a way not seen in other advanced economies,” they wrote. “Easying labor market conditions have led to a declining trend in services price inflation and increased confidence that the Fed’s current policy stance is containment.”
They still see a 45% chance of a recession happening in the second half of 2025.
U.S. payrolls slow to 114,000 in July, unemployment unexpectedly rises
On May 26, 2023, the company’s logo was unveiled on the JPMorgan Chase headquarters building in New York City. (Michael M. Santiago/Getty Images/Getty Images)
Economists also Federal Reserve Interest rates will remain elevated at up to 30% for a longer period, and with inflation easing, JPMorgan expects the central bank to cut rates twice this year, once in September and once in November.
“This modest upgrade in our assessment of recession risks contrasts with the more substantial revision we are making to our interest rate outlook,” they wrote.
Interest rate cuts are on the horizon, but mortgage rates may remain high
The analysts’ report came on the heels of a disappointing July jobs report that showed total nonfarm payrolls rose by just 114,000 in July and the unemployment rate unexpectedly rose to 4.3%. The report rekindled fears of an economic slowdown because it triggered the so-called thumb rule, a measure used to show early signs of an economic downturn.
The rule states that a recession is likely when the three-month moving average of the unemployment rate is at least 0.5 percentage points higher than its 12-month low.
‘Wall Street’ sign on Friday, January 27, 2023, in New York, USA. (Photographer: John Taggart/Bloomberg via Getty Images/Getty Images)
The unemployment rate over the past three months has averaged 4.13%, 0.63 percentage points higher than the 3.5% forecast for July 2023. The Sarm Rule has accurately predicted every recession since the 1970s.
Still, former Fed economist and architect of the rule, Claudia Tharm, suggested the current rise in unemployment may not signal a recession, because it’s not due to layoffs or negative monthly payroll figures, but rather to an increase in the number of available workers, including immigrants.
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“Even if Samrull is exaggerating a little bit, what we’re seeing paints a very disturbing picture,” Sam told FOX Business’ Charles Payne on Wednesday.
Stocks fell sharply on Friday following the report, giving the S&P 500 its worst day since October 2022. Since then, the market has been very volatile, but opened higher on Thursday after jobless claims came in higher than expected.
