JPMorgan Chase analysts now view a recession in the U.S. economy as more likely by the end of the year.
In a Wednesday analyst note, JPMorgan economists, led by Bruce Kasman, raised the probability of an economic downturn this year to 35%, up from their earlier estimate of 25%, citing a slowdown in labor market pressures.
"U.S. wage inflation is now decelerating in a way not observed in other developed market economies," they noted. "Easing labor market conditions enhance confidence that service price inflation will decrease and that the Fed's current policy stance remains restrictive."
They also project a 45% chance of a recession in the latter half of 2025.
With inflation easing, JPMorgan expects the central bank to cut rates twice this year, in September and November, reducing their previous estimate of a prolonged high-rate environment to just 30%.
"This modest increase in our recession risk assessment contrasts with a more significant revision we are making to our interest rate outlook," they stated.
The note follows a disappointing July jobs report, which revealed that total nonfarm payrolls increased by only 114,000, while the unemployment rate unexpectedly rose to 4.3%. This report reignited concerns about a slowing economy, as it triggered the Sahm Rule, an early recession indicator.
The Sahm Rule suggests that a recession is likely when the three-month moving average of the unemployment rate is at least half a percentage point above the 12-month low.
