JPMorgan Chase & Co. raised the probability that the U.S. economy will enter a recession this year, the latest sign of concern about the country’s financial health after this week’s market turmoil. Chief global economist Bruce Kasman told clients in a note on Wednesday that the bank raised the probability of a U.S. or global recession to 35% by the end of the year. This is higher than the 25% figure in the bank’s mid-year outlook. At the same time, JPMorgan Chase maintained the probability of entering a recession in the second half of 2025 at 45%. The move comes as investors have questioned in recent days whether the economy is about to slow down after last week’s disappointing jobs report. But traders got better news on the labor market front Thursday, with weekly jobless claims falling below economists’ expectations. Castleman noted a “substantial positive shift” in U.S. inflation risk conditions, in part due to easing labor market pressures as demand cooled. He also noted that wage inflation is slowing in a different way than in other developed economies. Now, he said, U.S. unit labor costs have “adjusted to levels broadly consistent with the Fed’s inflation target.” In light of this change, the economist lowered the likelihood of a longer-term higher interest rate scenario. While the Fed kept rates steady at last week’s policy meeting, federal funds futures are pricing in a 100% chance of a rate cut at the September meeting, according to CME’s FedWatch tool. To be sure, while Kassman raised the odds, he said investors shouldn’t assume all signs point to a recession. In fact, Kassman said his increase in near-term recession risks is modest. “More fundamentally, the vulnerabilities typically associated with recessions — sustained margin compression or credit market stress, as well as energy or financial market shocks — are conspicuously absent,” Kassman told clients. Kassman is not Wall Street was the only one raising expectations for the outcome. Goldman Sachs raised its economic forecast over the weekend to 25% from 15%, but said a recession is avoidable given the Fed’s ability to lower interest rates or buy bonds.
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