Economic Predictions
Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics, told Al Jazeera that the rise in unemployment indicates a potential recession in 2025. “I’m expecting the [US] Fed to start cutting the policy rate in September, and to continue cutting in subsequent meetings. That response will probably ensure a shallow recession,” Hufbauer told Al Jazeera.
What’s the Recession?
A recession is defined as a significant decline in economic activity across the economy, typically visible in GDP, real income, employment, industrial production, and wholesale-retail sales, and often marked by two consecutive quarters of negative growth. Recessions can result from reduced consumer and business spending, high unemployment, and financial crises, leading to job losses and decreased consumer confidence.
What US Key Indicators are Suggesting?
It is often said that if the US sneezes, the world catches cold. Here are some key numbers from the US.
Unemployment Data: The jobs report shows a slowdown in job growth, with only 114,000 jobs added in July compared to 179,000 in June. This decline raises concerns about the economy potentially edging toward a recession. The labor force participation rate increased, indicating more people were either employed or actively seeking work.Average hourly wages grew by 3.6% year-over-year in July, down slightly from June’s 3.8% increase. The Federal Reserve aims for wage growth between 3.0% and 3.5% to align with its 2% inflation target.
Industry Layoffs: In 2024, firms in the US and Canada have continued to reduce their workforce across various sectors, including technology, automotive, financial services, and manufacturing. This trend persists despite diminishing recession fears and uncertainty over the Federal Reserve’s stance on interest rate cuts.
Housing Market Concerns
Some experts have warned of a significant insurance gap for wildfire and flood risks, affecting over 17 million homes in the US. This underinsurance poses a potential $1.2 trillion threat to property values. Natural disasters have caused over $120 billion in damages globally this year, with only $62 billion of these losses insured. Most of this uninsured damage occurred in the US, primarily affecting homeowners.