Economists Estimate Probability of Recession Happening Next Year Is 21%

Estimate is up from just 10 percent a year earlier

June 20, 2016

Economists estimate that the probability of a recession starting next year is at 21 percent, up from 10 percent a year earlier, the Wall Street Journal reported.

"Gut-wrenching gyrations in financial markets early in the year helped summon the specter of a new recession," states the article. "Now, warning signs are coming mostly from the U.S. economy itself."

Business investment has declined, hiring is slowing, and corporate profits are under pressure which are signs of an economic downturn, according to Wall Street Journal economists.

"Whether this proves to be the precursor to a recession or yet another false alarm could take years to sort out," explains the article. "Uneven economic growth throughout the seven-year expansion has delivered several such scares that passed. But plenty of gauges are pointing to a decent chance of a recession starting within the next 18 months."

According to the article, the jobs report from May was the weakest month of hiring since 2010 and had some economists concerned about economic growth.

"Signs of trouble extend beyond the job market," explains the article. "J.P. Morgan Chase economists have been gauging the odds of a recession using a model that incorporates an array of economic indicators, from business-sentiment gauges to auto sales."

"As of last week, the model signaled a 34% chance of a recession within 12 months," states the report. "That was down a bit from 36% earlier in the month but up from 21% back in January."

Published under: Economy