economy
Recession odds climb on Wall Street as economy shows cracks beneath the surface
Economists have pulled up their risk assessments of a contraction amid heightened uncertainty over geopolitical risk and a labor market slump.
TL;DR
- Wall Street forecasters have raised their recession odds for the U.S. economy in the next 12 months, with some models showing probabilities as high as 48.6%, compared to a normal risk of around 20%.
- Heightened uncertainty due to geopolitical risks, specifically the ongoing Iran war, and strains in the labor market are primary drivers of these increased recession expectations.
- An oil shock, historically preceding most U.S. recessions, is a significant concern, with gas prices already having risen substantially.
- Economists note that the labor market has shown signs of weakness, with very low job creation in 2025 and job losses in February, and hiring concentrated in health care-related fields.
- Consumer sentiment also reflects pessimism, with a majority expecting a recession in the next 12 months.
- While Fed Chair Jerome Powell has downplayed the threat of stagflation, the current situation exhibits some of its characteristics, such as high prices and slowing growth.
- The impact of rising asset prices on consumer spending is questioned, with a potential loss of growth if this wealth effect diminishes.
- Despite concerns, some underlying supports for the economy exist, and a global resolution to the war could help avert the gloomiest predictions.