JPMorgan has raised its chances that the U.S. economy will fall into recession this year, the latest sign of concern about the nation’s financial health following this week’s market turmoil. Bruce Kassman, the bank’s chief global economist, said in a client note on Wednesday that the bank has raised its chances of a U.S. or global recession by the end of the year to 35 percent, up from a 25 percent figure in the bank’s midyear outlook. Meanwhile, JPMorgan left its chances of a recession by the second half of 2025 unchanged at 45 percent. Investors have been questioning whether an economic slowdown is imminent in recent days after last week’s disappointing jobs report. But traders got more positive news on the labor market on Thursday, when weekly jobless claims fell short of economists’ expectations. Kassman noted that the risk profile of U.S. inflation has “turned significantly more positive,” in part because weaker demand has eased pressures on the labor market. He also noted that wage inflation is slowing in a different way than in other developed countries. He said that U.S. unit labor costs are now “realigned to levels roughly consistent” with the Federal Reserve’s inflation target. Given this change, he lowered the likelihood of a scenario in which interest rates remain high for an extended period of time. The Fed left interest rates unchanged at its policy meeting last week, but federal funds rate futures are pricing in a 100% chance of a rate cut at the September meeting, according to CME’s FedWatch tool. Indeed, despite raising the probability, Kassman said investors should not assume that all signs point to a recession. In fact, he explained that the rise in near-term recession risks is modest. “More fundamentally, the vulnerabilities that typically accompany a recessionary breakout — continued margin compression, credit market stress, and energy and financial market shocks — have significantly decreased,” Kassman told clients. Kassman is not the only Wall Street firm raising expectations for such an outcome. Goldman Sachs raised its forecast to 25% from 15% over the weekend, but said a recession is avoidable given the Fed’s ability to cut interest rates and buy Treasury bonds.
JPMorgan raises 2024 recession probability to 35%
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