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The
brokerage in a note on Monday maintained its base case of a soft
landing for the economy with consumer spending broadly
determining the trajectory of growth; however, it called the
outlook "cloudy".
Earlier this month, J.P. Morgan raised the odds of U.S.
recession by the year-end to 35% citing easing labor market
pressures, while Goldman Sachs lowered its probability of a
recession in the next 12 months to 20%.
Last week the U.S. Department of Labor had lowered its estimate
for total payroll employment by 818,000 for the period from
April 2023 to March 2024, meaning U.S. employers had added far
fewer jobs than originally reported in the year through March.
This came on the heels of the U.S. unemployment rate jumping to
a near three-year high of 4.3% in July amid a significant
slowdown in hiring, raising fears the labor market was
deteriorating and potentially making the economy vulnerable to a
recession.
Expectations for a rate cut of up to 50 basis points in the
September meeting of the U.S. Federal Reserve have risen, with
Chair Jerome Powell signaling in his speech at Jackson Hole last
Friday that the 'time has come' to reduce rates.
With the excess savings built up during the pandemic being used
up, "continued income growth will be critical to keep spending
rising, since a steady savings rate is probably the best we can
hope for," said Brian Rose, senior U.S. economist at UBS.
(Reporting by Gokul Pisharody in Bengaluru; Editing by Mrigank
Dhaniwala and Vijay Kishore)
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