U.S. Economy Faces Possible Recession by End of 2024

Analysts are sounding alarms about potential economic trouble ahead for the United States. Several key indicators that have historically predicted downturns are aligning, suggesting a recession may be looming.

According to research from Game of Trades, there are worrying signs in the labor market. Initial jobless claims have risen significantly, increasing from 190,000 in January to 240,000 recently. This pattern mirrors previous pre-recession periods, such as those before the financial crises in 2008, 2001, and 1990.

Another red flag is the declining perception of job availability. Over the past year, more people report that jobs are becoming harder to find, a sentiment that typically emerges about a year before a recession. This shift indicates growing unease in the labor market, suggesting a potential rise in unemployment soon.

Perhaps the most telling sign is the inverted yield curve, a financial phenomenon where short-term interest rates exceed long-term rates. This inversion has been a consistent predictor of recessions in recent economic history. Currently, the yield curve has been inverted for the longest period since 1929. Despite the rise in jobless claims, the yield curve hasn’t steepened yet, which means the financial markets might not have fully priced in the risk of a recession.

Adding to these concerns is the disconnect between economic indicators and the performance of financial markets. Historically, in the early stages of a downturn, the stock market continues to rise even as economic indicators worsen. This trend has been observed since January 2024, with the S&P 500 climbing about 15% despite rising jobless claims. This suggests that the financial markets may be underestimating the potential for an economic downturn.

Given these signs, analysts are now speculating about the timing of a possible recession, with some predicting it might occur in the latter half of 2024, particularly if sectors like the stock market and crypto reach new highs before then.