Warning amid US soft landing outlook... BlackRock says "Recession has already begun"

US Economic Soft Landing Outlook Spreads
Concerns Rise Amid Signs of Employment Slowdown
'Wall Street Emperor' Dimon Says "Believing in Continued Boom Is a Huge Mistake"

"The US recession has already begun."

This is the recent diagnosis from BlackRock, the world's largest asset management firm. Signs of a shrinking labor market, such as rising unemployment rates, are leading to a slowdown in consumption, which could plunge the US economy into a recession as early as the end of this year. Additionally, the slowing rise in the core Consumer Price Index (CPI), which reflects the underlying trend of inflation, is being interpreted as a signal that the US economy is cooling down. This analysis is spreading, dampening the Wall Street optimism about a soft landing for the US economy.

On the 13th (local time), Rick Rieder, Chief Investment Officer (CIO) of Global Bonds at BlackRock, the largest asset management firm in the US, stated that he had hoped the US could avoid a recession, but his expectations were off. He said, "For the first time, we have confirmed looseness in the labor market," adding, "Many people are ignoring the risk of a recession, but we are already seeing visible signs of one. The recession has already started."

Amundi, Europe's largest asset management firm, also noted signs of a slowing labor market and forecasted an economic contraction by the end of this year or early next year. Vincent Mortier, CIO of Amundi, analyzed, "The possibility of a recession is very high. The key question is how deep and how long the recession will last."

The two global asset management giants recently focused on the rising unemployment rate. In August, the US unemployment rate rose to 3.8%, up 0.3 percentage points from 3.5% in the previous month. Treasury Secretary Janet Yellen explained that the rise was due to an increase in job seekers, but these firms interpreted it as a precursor to a recession. They viewed it as an early symptom of a vicious cycle: 'employment slowdown → consumption decrease → corporate profit deterioration → further employment slowdown.' They also noted that the US federal government's debt problem is severe, making it difficult to respond to a recession with expansionary fiscal policy. Mortier said, "US consumers are exhausted," and added, "The wall of refinancing is approaching (for companies)."

Jamie Dimon, Chairman of JP Morgan, known as the "Emperor of Wall Street," also stated on the 11th, "Although the US economy is currently performing well, believing this situation will continue for several years would be a huge mistake."

Following these forecasts, BlackRock and Amundi have recently increased their holdings of US Treasury bonds. They are betting on rising Treasury prices (= falling bond yields) based on the view that the Federal Reserve's rate hikes have ended. They also expect the value of the dollar to decline due to the US recession.

This outlook contrasts with recent Wall Street economic forecasts. According to a survey released by Bank of America (BofA) on the 12th, about 75% of global fund managers expect a soft landing for the US economy, up from 68% in the June survey. Secretary Yellen also expressed on the 10th that her confidence in a soft landing is growing.

Whether expecting a soft landing or a recession, opinions differ regarding employment, but there seems to be consensus that the inflation fire has been contained. The US Consumer Price Index (CPI) for August rose 3.7% year-on-year, up 0.5 percentage points from 3.2% in the previous month, marking two consecutive months of increase due to soaring international oil prices. However, the core CPI, which excludes volatile energy and food prices, rose 4.3%, down from 4.8% the previous month. On Wall Street, as the core CPI that the Fed closely watches declined, the possibility of the Federal Open Market Committee (FOMC) holding rates steady at the meeting scheduled for the 19th-20th has increased.

This content was produced with the assistance of AI translation services.