US Recession Looms as Warning Signs Emerge

Photo courtesy of The News JournalPhoto byThe News Journal

Contrary to what many believe, investment research firm BCA Research sees that the economy is on the cusp of a recession, and the predicted upcoming U.S. Federal Reserve rate cuts will not be sufficient to steer markets out of it.

Garry Evans, BCA Research's chief strategist of global assets said, “Every single one of us now believes there's a recession, and that's exactly the opposite of what the market believes”.

Evans mentioned the warning signs of the economy slowing down, including what he called the "deteriorating" U.S. labor market. The U.S. Labor Department reported that the unemployment rate inched to 4.3% in July to its highest since October 2021, and U.S. manufacturing activity fell to an eight-month low in the same month.

Strategists suggest A few rate cuts are not going to prevent a recession. The average recession is 10 months which means It takes something like a year before federal rate cuts start to boost the economy in the right direction.

“The market believes that the fed fund rate at the end of next year will be 3%. It's currently at 5.3%. That will not happen unless there is a recession," Gary Evans said.

What is a Recession?

A recession typically occurs when there are two consecutive quarters of decline in a country's real GDP.

Traders are also keeping their eye on the annual economic policy symposium in Jackson Hole this week, which could offer greater clarity on the interest rate outlook, with Fed Chair Jerome Powell set to speak at the gathering on Friday.

The U.S. economy has remained robust even amid ongoing inflation and elevated interest rates.

In the last century, there have been more than a dozen recessions, some lasting as long as a year and a half. Although the U.S. Is not officially in a recession, a survey conducted by Affirm reveals that about 3 out of 5 working Americans think the United States is already in recession.

Share your thoughts:

Do you think the United States is going into a recession, or do you think recession is already here?