Economists are increasingly cautious about the United States’ economic trajectory, with Allianz Chief Economic Advisor Mohamed El-Erian delivering a stark warning. “The notion of a U.S. recession seemed remote just a few months ago,” El-Erian wrote, “More recently, however, that picture has started to change.”
What Happened: El-Erian’s analysis in a Bloomberg Opinion piece suggests the likelihood of an economic downturn has dramatically increased from 10% to 25-30%.
The economic landscape is marked by multiple warning signs. Key financial indicators are signaling potential trouble, including a 70-basis-point drop in 10-year Treasury bond yields and oil prices falling below $70 per barrel. These movements coincide with disappointing economic data and growing uncertainty surrounding current economic policies.
El-Erian highlights three critical stages of economic weakness: struggling lower-income households facing dwindling savings and mounting debt, a hesitant corporate sector adopting a wait-and-see approach, and the looming threat of potential tariff conflicts that could disrupt global supply chains.
Why It Matters: Economist Peter Schiff offered a more radical perspective on economic restructuring, arguing, “Tariffs are not the way to rebuild America’s manufacturing base. We need to restore the competitiveness of American industry.” He believes short-term pain is necessary, stating, “A lot of money will be lost as the air comes out of a decades-long financial bubble. But the long-term gain will be worth the short-term pain.”
Adding to the economic uncertainty, renowned economist and Ford School Professor Justin Wolfers emphasized the broader context, noting, “There’s one theme that can tie together Ukraine, tariffs and DOGE: Economic chaos, sowing the seeds of uncertainty. And that has me worried for our short-run economic future.”
El-Erian points to multiple warning signs, including falling Treasury bond yields and disappointing economic data. He highlights three critical stages of economic weakness: struggling lower-income households, a hesitant corporate sector, and the potential for disruptive trade conflicts.
The economic outlook remains precarious, with the potential for significant growth projection revisions. As El-Erian concludes, “It is just a matter of time until economic forecasters revise down their 2025 growth projections.”
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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