US Recession Risk Quantitative Model Analysis

This technical report presents an analysis of US recession risks using quantitative models. It outlines the current state of the US labor market, indicating a benign loosening that may support a soft landing, but warns that this trend may not persist. The report details the findings of various recession indicators, including the yield curve and the Conference Board’s Leading Economic Indicator (LEI), which continue to signal elevated risks in the medium term. The report explains that while near-term models show a decline in recession probability, medium-term models still indicate a significant risk. It discusses the implications of financial market conditions on recession predictions and highlights the potential for a mild recession as the most likely outcome. The report concludes that while the economy shows signs of resilience, it has not yet fully absorbed the effects of monetary tightening, suggesting that challenges may arise as consumer savings dwindle and corporate borrowing costs rise.