UBS Global Wealth Management has increased the likelihood of a U.S. recession to 25% from 20%, pointing to a weakening job market and concerning July unemployment data as key factors.
Despite maintaining a base case for a soft economic landing, UBS described the economic outlook as “cloudy,” with consumer spending expected to play a pivotal role in future growth.
This adjustment follows similar moves by other major financial institutions. Earlier, J.P. Morgan raised its recession probability to 35% by year-end, while Goldman Sachs lowered its estimate to 20% for the next 12 months.
The U.S. Department of Labor recently revised its employment figures, revealing that 818,000 fewer jobs were added between April 2023 and March 2024 than initially reported.
This revision, combined with July’s unemployment rate reaching a near three-year high of 4.3%, has intensified fears of a deteriorating labor market.
In light of these developments, expectations have risen for the U.S. Federal Reserve to implement a rate cut of up to 50 basis points in its September meeting, as indicated by Chair Jerome Powell’s remarks at Jackson Hole.
UBS’s senior U.S. economist, Brian Rose, emphasized that with pandemic-era savings dwindling, continued income growth will be essential to sustaining consumer spending.