New Delhi

UBS Global Wealth Management has revised its forecast for a US recession, raising the probability from 20 per cent to 25 per cent, according to a Reuters report. This adjustment comes amid mounting worries about economic instability, driven primarily by underwhelming job growth and recent unemployment statistics. UBS's updated prediction reflects a deepening concern over the US economic landscape, which is currently characterised by uncertainty and signs of potential weakening.

The increased likelihood of a recession underscores the challenges facing the economy, as recent data points suggest a less robust labour market and broader economic vulnerabilities. The firm's revised outlook suggests a growing recognition of the risks associated with the current economic environment and highlights the possibility of a downturn in the near future. 

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In a note released on August 27, 2024, UBS cited recent data showing a significant slowdown in hiring and a rise in the unemployment rate to 4.3 per cent in July, its highest in nearly three years, as key factors influencing its revised forecast. The US Department of Labor's adjustment of total payroll employment by 818,000 for the year through March 2024 further fuelled recession fears, indicating fewer jobs were created than previously reported. 

UBS's new forecast aligns with broader economic uncertainty. Earlier this month, JPMorgan increased its recession probability for the year to 35 per cent, attributing this to easing labour market pressures. Conversely, Goldman Sachs reduced its recession probability to 20 per cent over the next 12 months, reflecting more optimistic expectations. 

The increased probability of a recession has intensified discussions about potential Federal Reserve actions. Expectations are growing for a possible rate cut of up to 50 basis points in the Fed's September meeting. Federal Reserve Chair Jerome Powell signalled in his recent Jackson Hole speech that a reduction in rates might be imminent. 

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UBS senior US economist Brian Rose noted the critical role of consumer spending in shaping future economic growth. He emphasised, "Continued income growth will be critical to keep spending rising since a steady savings rate is probably the best we can hope for." This revised outlook from UBS underscores the ongoing economic uncertainties and the potential need for further monetary adjustments to navigate the evolving economic landscape.