JPMorgan Says Recession Odds Rise To New Cycle Highs

While not quite as dire as the recent analysis by Deutsche Bank which calculated recession odds in the next 12 months as more than likely, or 60% as of last weekend, moments ago JPM released its own latest recession probability analysis, and - somewhat unexpectedly following today's outlier jobs report - sees a 37% chance of a receession in the next 12 months. This is the highest recession probability calculated by Jamie Dimon's bank during the current economic cycle.

Here is what JPM's Jesse Edgerton came with this number:

After edging down to 34% on June 16, our preferred macroeconomic indicator of the probability that a recession begins within 12 months has moved back up and now sits at 37%, narrowly above the previous expansion high (Table 1, bottom row and Figure 1, blue line).

 

 

The probability from this model based on macroeconomic data remains moderately above our models based on financial markets (Table 2).

 

 

The 5% decline in June auto sales was the primary driver of the increase in probability, with the decline in May single-family housing permits also making a small contribution. Our composite measures of consumer and business sentiment changed little since our last update, as upward and downward surprises were roughly offsetting. The increase in the unemployment rate in this morning’s report sharply raised the probability of recession in the near-term model based on the unemployment rate (Table 1, fourth row from bottom), but also lowers the “background risk” of overheating (Table 1, second row from bottom).