US Recession Red Flags (Uncut) 03-15-2025

ALERT: US Recession Red Flags, Price Expectations Soar on Tariffs as US Consumer Sentiment Drops

Welcome back to World Affairs in Context, everyone. Thank you so much for joining me. U.S. consumers are becoming more and more pessimistic as the United States president points to a recession being inevitable.

Market probabilities of a U.S. recession are rising. Five-year treasuries are now pricing in a 52% chance of a recession within the next 12 months, up from 45%. In November, recession odds priced in by the Russell 2000 index spiked to 48%.

S&P 500 odds of a downturn jumped to 22%. And base metals also show a 52% probability of a downturn. A recent JP Morgan report put the chance of a recession at 40%, up from 30% at the start of this year, warning that U.S. policy was, quote, tilting away from growth.

And that is to put it mildly, of course. U.S. consumer sentiment index dropped to a nearly 2.5-year low in March, and inflation expectations soared. The University of Michigan published the latest data that doesn’t really leave any room for hope, unfortunately.

Consumer sentiment actually slid another 11% in March, to 57.9, the third straight month of decline. Declines are seen consistently across all groups by age, by education, income, wealth, and by political affiliation, as well as by geographic regions. Long-term inflation expectations also surged to 3.9% in March, from 3.5% a month prior to that in February.

This is not surprising, of course, because the U.S. President Donald Trump openly admitted that we are indeed heading into a recession. Of course, he prefers to call it short-term pain. He attributed possible economic downturn to factors such as trade tensions and global economic uncertainties.

Now, one could argue that waging trade wars on your neighbors and on your biggest importers would do that to your economy. And so in that clip, which I won’t play here on YouTube due to content rights, but you can watch it on my X and on Telegram, Trump referred to the situation as a period of transition. Those are his words.

He said, it’s just going to be a period of transition. And it sounds very similar to Fed Chair Jerome Powell’s assurances of a transitory inflation back in 2019. Is it time to prepare for a recession? It appears that key economic data does point to a significant downturn ahead.

First, labor market is cooling. 588,000 Americans lost their jobs last month. This is the second highest drop since the 2020 pandemic, according to the Household Survey.

People working part-time jobs while seeking full-time employment jumped 460,000 in February to 4.9 million people. This is the highest number since May of 2021. Over the last two and a half years, the number of underemployed Americans has risen by 1.3 million individuals.

The U.S. economy is slowing considerably. Several weeks ago, President Trump in his congressional address discussed a variety of government actions that would reshape the U.S. economy with potentially positive and negative longer-run consequences. It was a great, upbeat speech, but the reality is quite different.

Since the end of 2024, consumer confidence has slid sharply, and the U.S. economic growth continues to slow. And this is not something that can be reversed overnight. The Federal Reserve Bank of Atlanta’s daily tracking estimate of U.S. real GDP growth in the first quarter is actually negative 2.4%. It is expected to continue, if not worsen, into the second quarter of this year.

So, is now a good time to start preparing for a recession? I would say so. Typically, I go over key economic data. Today, we’re going to do something different.

I would like to discuss the underlying drivers that result in conditions leading to a recession. We need to discuss policies. There are several important factors at play when it comes to President Trump’s policies.

First, flip-flopping on trade policies has a very negative impact on the markets. Creating waves may be a political move. It could be a strategic political tactic.

But there is a good argument to be made that if there is so much uncertainty and going back and forth on your own policies and on your own words on a weekly or bi-weekly basis, that will actually bite back. You’re going to get fewer businesses willing to expand, willing to invest into growth, willing to hire more employees to cover their needs, because instability is actually bad for business. Instability, market volatility, increases fears of recession.

And what we have now is arguably a complete chaos. One day, we favor tariffs. The next day, we extend the deadline saying that, okay, we’ll exclude these goods from our tariffs, but then we’ll include these goods.

Then the third day, we say that we’ll just double down on our tariffs. Donald Trump’s Commerce Secretary Howard Lutnick recently stated that Trump’s policies are, quote, worth it even if they lead to a recession. Are they worth it to you? Let us know in the comments if you agree with Lutnick.

The second equally important factor that we might want to consider is the Trump administration’s immigration policy. Regardless of what your views are on deportation of illegal migrants, it is common knowledge that immigration actually helps expand the labor market. Estimates of the costs associated with President Trump’s proposed mass deportations actually vary significantly.

The American Immigration Council suggests that a conservative estimate for deporting 15 to 20 million individuals could reach at least $315 billion or approximately $968 billion over a decade. Additional reports indicate that Immigration and Customs Enforcement, or ICE in short, is currently facing a $2 billion shortfall for the fiscal year, which was actually made worse by efforts to implement stricter immigration measures. So, government spending increases to deport illegals, it fuels inflation, and also it tightens our labor market even more.

Of course, there are benefits, and this is not an argument for or against deportation. No nation should have open borders that directly threaten the security of its own people. But it is important to understand that there is a cost to every policy choice.

Whether you lean left or right, or you fall somewhere in the middle, there is a cost to every policy choice. And it is important to be aware of those costs. Large-scale deportation could fuel a labor market supply shock.

So, this is definitely something very important to be aware of. To sum it up, even though inflation numbers appear to be trending down, we are on track for a major economic downturn with multiple indicators flashing red. In my next video, we’ll continue this topic and we will focus on U.S. national debt and the growing budget deficits in further detail.

Thank you so much for joining me. Thank you for watching the video. Remember to like, subscribe, and share to show your support.

Have a great rest of your day, and I will see you back here tomorrow. Bye for now.