Fed Now Predicting US Recession (Uncut) 03-06-2025

the Atlanta fed is now predicting an actual economic contraction in the United States a possible warning on the health of the economy coming from the Atlanta fed today showing a potential decline of 1 and a half% in GDP growth for the first quarter I’m going to reveal why they’re giving this warning that the United States may go into an actual recession and I’m going to tell you if this is something that you should be worried about in three simple fast Steps step number one let’s go over the Atlanta fed’s GDP forecasting tool

called GDP now there’s a chart today’s date we go all the way back to well not that far back to December of 2024 the end of December and on the left we start in the middle at 0% go up to 4% but then down to a -3% so this blue line represents the market consensus for GDP GDP q1 of 2025 so they’re thinking right around the beginning of the year we’re going to be a little over 2% and they really haven’t changed much where the Atlanta fed comes out at the end of January predicting right around 3.5% goes up to

call it approximately four down to about three then straight across but then it really starts to decline let’s say right around the middle of February going from right around 3% down to a little over two where they were just last week to be more specific just on Thursday of last week they were predicting a positive 2.3% then on Friday we get the while E coyote moment and the the Atlanta fed’s GDP now forecasting tool where we go from 2.3% all the way down to a negative 1.5% oh but wait there is more the very

next business day after they dropped it to a negative 1.5% they dropped it again to a negative 2 8% and by the time you’re watching this video who knows it could be at a -10% at the rate we’re going right now so the next question we have to ask is how accurate has this been in the past editor go ahead and throw up a chart please and we can see this blue line shows us what the Atlanta feds forecasting tool was predicting and then the orange bar is the actual us US GDP you can see just a couple years ago how

the Blue Line went down rapidly and then actually went negative and sure enough we had a contraction in the US economy but I’d like to point out that our starting point first and foremost was much higher back then and today they’re predicting the GDP number that we’ll see in q1 of 2025 is going to be much more negative than what they were predicting back then the New York fed and the Dallas fed have predicting tools of their own now the data isn’t as recent as the Atlanta feds but we have to pay

very close attention to what they’re saying and currently New York is at a positive 2.9% Dallas at a positive 2.4% so the Atlanta fed is definitely the outlier right now but the next question becomes why why on Earth did Atlanta go from 2.3 all the way down to a -2.8 in such a short period of time step number two now let’s get into why the Atlanta fed is giving such a dire warning about the United States economy more specifically the contraction of GDP so we have to start by understanding how this GDP number is

calculated because it is far from perfect but it is a good proxy or at least it’s a metric that we need to use to try to determine the underlying health of the United States economy so editor let’s cut to a clip from Investopedia C plus G plus I plus NX equals GDP where C is the nation’s private consumption or consumer spending G is the sum of government spending I is the sum of business’s Capital spending and NX is the nation’s total net exports exports minus Imports so the last part there should give you a clue as to why

the Atlanta fed dropped from 2.3% down to a negative 1.5% to begin with a lot of it had to do with the trade deficit so let’s look at a chart of the trade balance I always call it the trade deficit because it’s always a deficit and we can see by looking at this table that the most recent print we had a deficit of 153 billion this is the largest of all time and the trend is obviously in the wrong direction look at January 2024 we were at90 billion in other words a deficit of 90 billion November of 2024

we are at 104 December of 202 4 122 and then this most recent just collapse from 122 to 153 in just one month think about that the trade deficit in Goods increased by 30 billion dollar in just one month so if the measurement of GDP which tries to tell us how many goods and services are produced in the United States is simply private sector spending government spending and let’s say investment and the trade deficit or Surplus when the trade deficit drops to that extent it’s going to negatively impact the Atlanta fed’s

forecasting tool so this explains most of what we saw in that first drop but it doesn’t explain why they went from a negative 1.5% and the very next business day they came out and adjust it to a 2.8% so let’s go to the Atlanta feds website and they actually give us their rationale so they say after this morning’s release from the US Census Bureau and the institute for Supply management the nowcast and that’s kind of the algorithm they use for GDP now of first quarter real personal consumption expenditures growth and real private

fixed investment growth fell from 1.3% and 3.5% to 0% and 0.1% which is basically 0% as well so a huge drop in their expectations for personal consumption and for private fixed investment well one of the reasons they’re coming to this conclusion is because of the report that came out just on Friday from the Bureau of economic analysis right here personal income and outlays January 2025 so this is the most recent report we have they say personal consumption expenditures pce decreased $30 billion just for the

month that’s really staggering when you think about it in fact look at previous months and you see the lowest going back to July of 2024 was in August where the increase was . 2% and now we are down to a negative. 2% what’s really interesting is when you look at a breakdown as to why we saw this net contraction of consumer spending so motor vehicles and parts was down and is hard to believe but down 41% and I believe that’s month over over month so a 41% decline in consumption in the category of Motor Vehicles and

parts Recreation goods and vehicles down almost 15% and you can go right on down the list the contractions spending and nonprofits household equipment durable goods clothing footwear food and beverage healthc care and transportation services now this is slightly offset by an increase in spending in things like insurance or gasoline energy Food Services accommodations housing and utilities and the point I’m trying to make is the majority of what people are cutting back on are the things that they

want where the majority of the additional spending is on things they need and I think the only reason they’re spending more on the things they need not necessarily because they’re buying more units of stuff but simply because the price is going up so they now have to take that additional percentage of their paycheck that they’re spending on food and rent and they have to take it away from something else that they would have spent money on in other words because the prices of the stuff they need go up their paycheck isn’t going up

at the same rate they have to take aggregate demand and spending away from the things they want which on net balance at least the last reading we have means a contraction of overall spending and when you have an economy that’s 70% spending then if you have even a slight contraction you’re most likely going to have negative GDP and inevitably a recession now I want to be very clear this may or may not be George gamon’s opinion what I’m doing right now in this step is I’m simply explaining why the Atlanta fed’s GDP now

forecasting tool has gone from 2.3% all the way down to a 2.8% in such a short period of time so the next question becomes is this something you should actually be concerned about step number three so is it time to panic the answer is no editor go ahead and throw up a chart of the unemployment rate going all the way back to the 1950s and we can see that pretty much every single time we get into a recession we see a huge spike in the unemployment rate so now let’s take it back to a more recent view of the exact

same metric and we start with today’s date going all the way back to let’s say March of 2023 on the left we go from 3.3% up to 4.3% now back in March of 2023 unemployment rate very low right around 3.5% and then it goes even lower down to 3.4 with a little volatility there but then you can see it went from 3.4 straight up to right around 4.2 now it has come down recently to the point where we are today at about 4% but the whole point is looking at this trend and editor go ahead and throw up that

longterm chart once again and now I’d like the viewer to focus on what happens just before the recession not necessarily the huge spike in unemployment when you’re in the recession and you can see almost every single time the unemployment rate trends higher before you get that recession and that big spike up so in terms of us actually being in a recession right now as we speak you shouldn’t be panicking about that but you should be paying attention to this stuff you can’t just bury your head in the sand and just

watch the mainstream media and assume that everything is going to be a okay it’s up to you it’s your responsibility your financial responsibility to pay attention to the good news and the bad news and when the Atlanta fed comes out and drops their GDP prediction down to a negative – 2.8% that’s an example of something you’ve got to pay attention to but it’s not just the unemployment rate with step number three here we also have to focus on credit spreads we talked about that in a prior video I think about a couple

weeks ago and this is basically the difference between the interest rate or the yield on let’s just say junk corporate debt and the same maturity of Treasury so let’s just assume right now for the sake of the example that the 2-year treasury is paying about 4% okay well a 2-year corporate bond let’s say that’s paying 4.2% so a 20 basis point spread and as you can see hopefully the editor throwing up a chart of credit spreads they’re extremely low right now in fact they’re at a low going all the way back

to the GFC a little bit of an ominous sign so if the stuff is really about to hit the fan the market is usually going to pick up on that first so going back to our example if the corporate bond yields went from let’s say 4.2% up to 4.5% up to 4.7% up to 5% if we see those credit spreads widening this is a warning signal you really need to focus on to understand the timing of how these macro economic events play out and let’s just remember that the New York fed and the Dallas fed they’re still in the positive

range going back to step number one I think New York fed is at 2.9 Dallas fed 2.4 so the Atlanta fed could be the outlier here we’re going to have to pay close attention to what their predictions do over the next few weeks when they update their data another thing you can do like my good friends the real estate guys always used to say the clues in the news clues in the news so you’ve got to pay attention to some of the economic things or the things in the news that will most likely affect the economy of the United

States such as Doge I’m a big fan of what they’re doing but we have to understand that if you’re eliminating all of these jobs mid and longterm that’s going to be much more beneficial for the economy but over the short run that will impact aggregate demand if you don’t see the growth side of the equation pick up and if it is true what the Atlanta fed is saying that we’re not going to have GDP growth we’re going to have GDP contraction when you combine that with what’s happening at Doge that is a very ominous

sign in the short run also tariffs I know this is a hot button issue but whether you like them or hate them or whether they’re just going to be used as a negotiating tactic or actually implemented and then to what degree they’re going to be implemented these are all unknowns we have to pay attention to because there is that possibility that they could lead to or at least exacerbate an econom IC contraction and lastly we really have to focus on and kind of look through the lens of what is happening with aggregate

demand because at the end of the day this is what’s going to lead to most likely the unemployment rate spiking telling us we’re probably already in a recession so again the US economy is 70% consumption so as an example let’s just assume the S&P 500 or the NASDAQ continue to go down because Nvidia is tanking well for a lot of people the majority of their net worth is in the stock market and this is a big psychological component because if they see the value of their portfolio going down by let’s say 20 or 30% they’re

going to spend a lot less money and one man’s spending is another man’s income the same thing with the housing prices I’m not saying they’re going to go down but if they were to go down this would be a feedback loop that would impact aggregate demand and therefore would most likely make the unemployment rate go even higher so the main takeaway from Step number three is you really shouldn’t lose sleep over the fact the Atlanta fed’s GDP now economic forecaster is calling for a contraction in GDP but you’ve got to pay attention

to it what I’m using to try to time these things a little bit better unemployment rate in the labor market overall and then on the financial economy side of things looking at credit spreads and let’s remember New York and Dallas still positive so at the end of the day there are no certainties there are only probabilities and we just have to take all of the data the good and the bad and include that into our overall analysis hey guys I’d like to personally invite each and every one of you to attend this year’s Rebel capitalist live

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