US Recession Chances Rise to 48%: Weak Job Market and Payroll Cuts Cited

Strategic Insights -

Credit rating agency Moody's has issued a warning that the chances of a US recession have increased to 48 percent, the highest level since 2020. The warning comes after recent weak job data and a record payroll revision of 9,11,000 jobs. Moody's Analytics Chief Economist Mark Zandi noted that the US economy is currently being supported by high spending from the wealthy, but cautioned that a significant reduction in their spending could lead to a recession.

Key Takeaways:

  • Moody's Analytics Chief Economist Mark Zandi stated that the US economy is being supported by high spending from the wealthy, with 49.2 percent of total consumption in the second quarter of this year attributed to the top 10 percent of income earners.
  • The chances of a US recession have risen to 48 percent, the highest level since 2020, according to Moody's.
  • A record payroll revision of 9,11,000 jobs has been reported, which Moody's said is usually a serious signal for future growth slowdown.
  • The US Federal Reserve has flagged employment risks and high inflation, cutting its benchmark interest rate by 25 basis points to 4.0 - 4.25 percent.
  • Spending by the wealthy remains a key support for the US economy, but a significant reduction in their spending could lead to a recession.
  • The top 10 percent of income earners accounted for the highest share of total consumption since records began in 1989, with 49.2 percent in the second quarter of this year.

Statistics:

  • 48 percent: The chances of a US recession, according to Moody's, the highest level since 2020.
  • 49.2 percent: The share of total consumption in the second quarter of this year attributed to the top 10 percent of income earners.
  • 9,11,000 jobs: The record payroll revision reported recently.
  • 4.0 - 4.25 percent: The current benchmark interest rate after the US Federal Reserve's 25 basis point cut.
  • 1989: The year records of total consumption by income earners began.

Sources:

  • Moody's Analytics
  • Bloomberg
  • US Federal Reserve
  • Indian National Press (Bombay) Pvt. Ltd.