The U.S. economy has likely entered a "recessionary state," with the risk of a recession over the next two years rising to about 50%, according to Barclays analysts.
The bank noted in a research memo that the updated "turning point" model, which includes recent payroll revisions, indicates that "the core growth rate in the U.S. has slowed to a level that makes it susceptible to recession."
Barclays added: "Different specifications suggest that the United States is likely in a recession, possibly for a year or more. With this increasing susceptibility, the model places the probability of a recession over eight quarters at around 50%."
The analysis relies on a regime-switching model that assesses the likelihood of the economy being in one of four states: rapid expansion, expansion, rapid recession, or recession.
Barclays stated that a recession is defined as a state in which the economy is "susceptible to entering a recession, but it is not an inevitable result."
Two key indicators were used: the ratio of non-farm payroll employment to the workforce and the unemployment rate, often referred to through the Sam rule.
Barclays stated that both measures "indicate a high likelihood that the economy is in recession," with probabilities ranging from 47% to 90% when considering early estimates of upcoming payroll survey revisions.
Barclays said that the results support expectations of interest rate cuts by the Federal Reserve later this year.
"Our results provide some support for the expectation that the Federal Open Market Committee will shift to cutting interest rates in September," the bank wrote, adding that it expects a 25 basis point cut in each of the
September and December.$XRP #HEMIBinanceTGE
