Recession Watch: Bank Of America Says US Economic Breakdown 'Could Come At Any Time'

One of the biggest concerns for investors heading into the end of the year is whether the U.S. economy will soon slip into a recession. On Monday, Bank of America economist Ethan Harris said he is "puzzled" by economists that don't anticipate a 2023 recession as their base case at this point.

Indicators Negative: Harris said all the major economic indicators are either already in recession territory or have been trending in that direction in recent months.

Related Link: Friday Market Wrap: S&P 500 Gains This Week Following Dovish Fed Minutes

Bulls have pointed out that the U.S. labor market has remained resilient, but Harris said the trendline in jobs growth over the past 12 months is clearly negative. If that trend continues, he said jobs growth will turn negative by summer 2023.

Outside of the jobs market, Harris said the ISM manufacturing index is trending lower, housing market indicators are negative, and nonresidential investment indicators are weakening.

While he believes a U.S. recession in the first half of 2023 is likely, he said timing a recession can be difficult.

"Often pressure builds up until there is a breaking point and activity starts to drop quickly. Such a break could come at any time," he said.

What's Next? Rising interest rates are expected to continue to weigh on U.S. economic activity for at least the next several months. The U.S. bond market is pricing in a 100% chance the Federal Reserve will raise interest rates by at least another 0.5% in December.

Related Link: Slower Interest Rate Hikes Will 'Likely Soon Be Appropriate': Fed Minutes

Investors will get more key economic updates on Wednesday when Fed Chair Jerome Powell delivers a speech at the Brookings Institution, followed by the U.S. Labor Department releasing its November jobs report on Friday.

Benzinga's Take: The SPDR S&P 500 ETF Trust SPY has been surprisingly resilient given the uncertain U.S. economic outlook. Investors may be anticipating the Fed can somehow get inflation under control without tipping the U.S. into a recession, an outcome Harris clearly believes is unlikely at this point.