The Fed does not “predict”, but its GDP projections say “yes”. 
The Fed’s Summary of Economic Projections (SEP),shows its median fourth-quarter year-over GDP projection was 1.4 percent.
“Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated.”
In March, the Fed’s GDP projection for 2024 was 1.7 percent. It’s now 1.4 percent.
At first glance, 1.4 percent does not suggest recession. A closer look says otherwise.
Since 1948, there have been 12 recessions. And since 1948 there have only been three false positive instances in which year-over-year GDP declined from above 3.0 percent to 1.4 percent or lower in which there was not a recession.
Year-Over-Year GDP at Recession Start
Of the 12 recessions since 1948, 10 of them started with year-over-year GDP in positive territory.
Excluding the Covid collapse, the average of 11 instances has year-over-year GDP at the start of recession at 1.2 percent.
Predict may not be the correct word, but the Fed’s economic projections strongly suggest recession.
Fed’s Counterproductive Actions
The Fed’s battles to prevent recessions have created economic bubbles of increasing amplitude over time.
Stock market and housing prices are beyond insane and the consensus bet appears to be that the Fed will act to keep them that way.
Fed Projects Higher Unemployment and Higher Inflation Citing Tariffs
Yesterday, I noted Fed Projects Higher Unemployment and Higher Inflation Citing Tariffs
The Fed’s outlook has soured vs its March forecast. “We expect a meaningful rise in inflation in the coming months,” said Powell.
Regarding jobs, Powell said the labor force, participation rate, wages are all at “healthy levels”.
“You can see perhaps a very slow cooling but nothing that troubling at this time.”
Apparently Powell believes BLS statistics. I don’t. He does not see the train coming down the tracks.
Click on the preceding link for more Fed projections.
I commented “There’s a very good chance unemployment arrests the Fed’s expected inflation. But that assumes I am correct on weakening jobs.“
Also short-term is one thing and long-term another.
The Fed has destroyed housing with inept QE to the moon, and Congress is about to whip up inflation with Trump’s One Big Beautiful Act. Finally, Trump is doing his part with inept tariff policy.
Nature of the Next Recession
Recession is baked in the cake. But will it be stagflation?
The answer depends on what Trump does with tariffs, how nations and consumers react to Trump’s tariffs, on Trump’s flip-flopping mass deportation policy, on deficits and the One Big Beautiful Act, and now on events in the Mideast.
I would not want to be in Powell’s shoes.
Related Posts
June 16, 2025: QCEW Report Shows Overstatement of Jobs by the BLS is Increasing
The discrepancy between QCEW and the BLS jobs report is rising.
June 15, 2025: Is the Fed Behind the Curve in Cutting Interest Rates?
That’s the claim in a Wall Street Journal op-ed.
June 17, 2025: Retail Sales Down Much More than Expected, Drop 0.9 Percent
Retail sales declined 0.9 percent led by autos down 3.5 percent.
June 18, 2025: Housing Starts Plunge 9.8 Percent to the Lowest Level in 5 Years
The homebuilders have spoken. And they don’t like what they see.
June 18, 2025: Intel Will Lay Off Another 15% to 20% of its Work Force
Big job cuts are coming in July.
I’ve said for decades THIS is why Rate of Change “RoC” is important. Inflection points occur (things flip”) when momentum stalls. (RoC approximates zero).
The truth is many individuals finances have felt like being in recession for several years due to the devaluation of purchasing power of their dollar. It is as if they got their hours cut and the paycheck does not finish the month.
Others are living quite comfortably an feel no struggle at all.
Using GDP to extract individual prosperity metrics as an average would be inaccurate at best.
Fortunately, the FOMC and its dot plots do not have an admirable record at predicting anything.
Additional wars with Pakistan and Turkey may keep the economy afloat.
Defense/Military spending is calculated in GDP so that’s one way to keep the denial afloat.
Is water wet?
the main reason i’ve avoided any concern with GDP. raytheon…….C suites milking us treasury to blow up trillions in wars never meant to be “won” seems very unproductive to me. anti GDP for 99.9% of amerikans. of course the FED only cares about keeping her owners in high cotton. the NYFED is privately owned. by the big boy bankers. the rest is eyewash.
“The Fed’s battles to prevent recessions have created economic bubbles of increasing amplitude over time.”
And this is a very important point. People simply don’t give enough credit to the Fed’s gymnastics to ensure our banking system is amply supplied to purchase treasuries. This is the primary method that the Fed is mucking with the system & staving off the next recession by funding huge budget deficits. Again, they’ve gone down this path consistently since 2009. And now they plan to reduce the SLR to allow banks to buy more treasuries.
In addition, there’s a clear shift in the data showing that private employment is starting to fill in the gap of slowing / negative federal employment. Be that as it may, it’s all about the labor market. Continued claims have certainly started to rise since late April. As I said previously, I think once continued claims breech 2M and stay above that level or keel rising four reporting periods, then I’d say the stance of the Fed is going to shift towards an initial 25 BP cut.
Check in with college grads looking for a first job this summer or one of the 10-12,000 that Intel is letting go next month.
I wonder if those layoffs are skewed toward coders. It wouldn’t surprise me.
I know for a fact that the Amazon CEO has stated twice in the last six months that college students don’t need to study computer programming anymore. Their AI has got a lot of that down.
Now granted, there are different levels within any job. I’m pretty sure all of this started back in July of 2023, when there was a rash of IT job losses from the over hiring that occurred post COVID. Now that has accelerated with AI-based layoffs, but no right-minded CEO is going to talk about this.
The next five years are going to be brutal for IT. IT is going to be the first sector to blow right pas the honeymoon phase of AI making you better at your job.
Unfortunately, probably 25% of the college graduates over the next 3 years will need to make some very tough career decisions.
This will be an important cohort that this administration needs to get out in front of with this Paul Revere message:
AI is coming, AI is coming! You need to reset your employment expectations.
Ultimately, this will be a very large group of people who will need to transition into trade-based jobs. They might not like it, but as the baby boomers accelerate their retirement over the next 5 years, I would bet that at least 1-5 white collar jobs are going to be lost to AI. That gap will easily grow to at least 2-5 jobs over the next 10 years and that might be conservative.
So, both new & existing white collar job openings are going to slowly decelerate, IMHO.
When Trump borrows his $5 trillion and spends it there will be no recession.
Well, for a while.
A bit off topic, and also in praise of Mish’s very fair non-censorship policy. I was censored on that liberal douche Wolfe Richter’s blog for pointing out the obvious economic harms caused by the not based on science lockdown policies. Anyone with access to the internet could research the science, and it clearly wasn’t there.
Let’s recall that the USA has experienced one of the most grotesque episodes of hysteria stoked by the corporate “news” establishment and conflict of interest pharma companies and pharmaceutical companies company payroll beneficiaries. Even Mish himself was caught up in it, endording on his website that the non-vaccinated be discriminated against when seeking hospital care. That people would voluntarrily wait in line to receieve an experimental transfection product was and is unbelievable.
So here is a breath of fresh air:
[Bhattacharya] …the idea that closing schools is good for you… the idea that you wearing a cloth mask prevents you from getting covid… the idea that immunity after covid recovery doesn’t exist… the idea that the vaccine will protect you from getting and spreading covid forever… None of that was rooted in science. And yet the public health authorities of this country decided that they were going to enforce the same kind of… ethical constrictions on those topics as they do [with] smoking.
[Huberman] When you say none of it was rooted in science, are you saying the science was mixed, or there was literally no evidence?
[Bhattacharya] There was really no science. So, for instance, the idea that cloth masks prevent you from getting and spreading respiratory diseases… There were a dozen randomized trials on flu before the pandemic, and… there was a Cochrane report looking at the literature on masking and influenza. And they concluded that the evidence was weak at best that these kinds of cloth masking in population settings actually prevent… the spread of influenza.
[Huberman] I heard a number of people say, “What’s the big deal about wearing a mask…? It’s not the same thing as a vaccine. It’s… a mask”… I’m just opening this up for sake of of consideration… Why did the masks become such an issue? Was it because it was a mandate? Is that what it’s really about?
[Bhattacharya] The mandate mattered, but… there were harms, some of which were recognized, some of which were not. For instance, I heard from parents of… hearing-impaired kids that the mask-wearing impaired the ability of the kids to learn to lip read… it’s also true that if you adopt and embrace public health messaging that’s self-evidently not rooted in science, you’re going to undermine the public trust in science and in public health.
[Huberman] I will say, based on these voices that I hear from a lot, that’s what they’re asking for. They’re asking for the exact message that you’re delivering now, which is… I’ll say it differently… They want to hear the scientific community say, “We messed up.”
[Bhattacharya] And we should. We should absolutely say that… For instance, you wear a mask while you walk into the restaurant… you sit down to eat, and you take your mask off, and that protects you protects people from getting and spreading covid? How? Everyone could see that. You don’t need to be a scientist to see that. That was obviously ridiculous public health messaging…
sweden did it best in the rich world. amerika did it worst. we are fat and stupid and think everything is a chance to virtue signal one’s party or religion……………masks for lefties, no masks for righties. amerika is dumb as fuck. pax dumbfuckistan from coast to coast. from bottom of ladder to top of ladder. bombs away baby.
I learned how to take 2 hours to drink a bottle of water on a plane without stopping. “…if even ONE life is saved….we’re all in this together!”
Wolf absolutely has an agenda. He sure does not like my stating that tariffs are inflationary. Wolf absolutely refuses to let any of my posts stand that show that U.S. companies and citizens pay the tariffs. In his world they somehow are paid by the nation that exports to us.
As for your covid rant? I personally know of a very healthy 40 year old woman that died. I believe got lucky that covid devolved and did not kill its host…
Let it go bro…
Wolf is a very smart economist who knows a lot about tariffs. Until proven otherwise, I’m going with his explanation. Again, potentially up to five groups can absorb tariffs:
Foreign producers
Foreign exporters
Domestic Importers
Domestic Retailers
Domestic Consumers
Be that as it may, I agree that he’s a pain when it comes to censoring.
Occasionally healthy young people die from the flu. Should we shut everything down for the next flu?
Waller of the fed is talking up a potential rate cut for July. Along with TACO pulling another capitulation, as is commonplace, on Iran, the market is rallying.
The casinos are open for business once again.
Not to take this too far back, but I remember when there was a lot of hand-wringing over the 40 billion federal deficit at the end of Clinton’s presidency. After Reagan got in and did take measures to kill inflation, his administration continued to pour oil on the fire so that the U.S. went from being the largest creditor nation (hard to imagine, isn’t it?) to the largest debtor nation in just nine years. But remember, as Cheney said: “deficits don’t matter”… at least not in the short run, I guess. If the dems had done this we’d never hear the end of it.
Simply remove the “Covid Spike” and we would already be in a massive recession IMO. With that spike, came a temporary “Glossing Over” to all the Malfeasance. The shades have been pulled back via DOGE, but much was lost and most never to be recovered. That all just started to show up big time, after the Democrats were largely removed from the office’s that they held. Other than bad attempts at continuing that charade, the mask has been removed, and we owe a heck of a lot of money still!!!
Maybe this is where Tariffs will come in and assist us, and the “Economic Deals” that were struck as a result of some of them? We have a boatload of New Cash arriving on our shores and from several different Entities/Countries. This will push numbers up quickly as it flows through the veins of the New Economy. I’m still convinced the Tariffs are going to be part of a big reason why… they’re coming and so is the avoidance of the recession perhaps, but with Real Money, and Not Printed!!!
DOGE is a sick joke much like playing poker at a table full of rank amateurs. They slow down the game and make stupid mistakes, but it’s easy to take their money.
DOGE is the savior of the American Financial System, in terms of wasteful spending being halted stat! Further DOGE has uncovered Billions upon Billions of stolen Taxpayers Money, used for nefarious projects meant to undermine America!
They may not be predicting a recession, but they are helping to orchestrate one. Is this in response to the Trump election, or have they seen the error of their ways for the past 20+ years. Foolish people rarely recognize their mistakes, and that’s especially true of academics, so that leaves retaliation for Trump. The Fed will screw the peons to the wall, while bailing out their billionaire clients. Higher for longer is meant to hurt the lesser class and no mercy will be shown to those voting Orange.
Always the victim… you people are pathetic.
You people?
Pretty much.
The Fed predicting a recession is good news! I clearly remember the Fed stating that the subprime crisis was contained.
We should all move forward confident that a recession is not emanate.
Actually it was Hank Paulson (then secretary of the Treasury) that stated that subprime was contained along with many banks and insurance companies presidents. Heck, S&P was giving AAA ratings to known trash tranches of mortgage securities!
The Fed’s contribution was to take away considerable liquidity just before the crisis was triggered.
Mish may concur…
Bernanke said contained. Paulson may have as well.
But I certainly remember Paulson’s big Bazooka Theory.
Did Trump learn from Paulson?
“If you have a bazooka in your pocket and people know it, you probably won’t have to use it.” Paulson said at a July 15 2008 Senate Banking Committee hearing. The reference was in regards to Fannie Mae and Freddie Mac.
Bazooka Flashbacks
https://mishtalk.com/uncategorized/battle-over-bazooka-point-lending/
https://mishtalk.com/uncategorized/helicopter-ben-pulls-out-bazooka/
https://mishtalk.com/uncategorized/compelling-banks-to-lend-at-bazooka-point/
“Did Trump learn from Paulson?” Really? That trump is capable of learning in any context is laughable, he is mentally ill as in fucking insane.
Agree 100%, whatever the Fed publicly predicts is generally not what happens.
P.S. Presumably Matt meant “Imminent”, not “Emanate”.
Yes Thank you!
Mish – Your thoughts on what happens if the courts take away the tariff rattle from Trump or alternatively, Trump gives up on the whole tariff game?
For me, the tariff uncertainty is what is impacting GDP, if that goes away then I’m not sure what else is out there to impede the economy except WWIII.
I understand and agree that tariffs are a tax on consumption and slow the economy and possibly, to the extent that people don’t adjust, raise price levels.
Wouldn’t it be true then that taxes also have the same impact? Sales taxes, excise taxes, property taxes, employment taxes, income taxes and others? Wouldn’t these also increase costs and raise price levels as well as slow the economy?
I’m trying to understand the fixation on tariffs rather than on the tax burden in total.
The issue is ridiculous tariffs. According to the latest “deal” with China, the tariff is now set at 55% – imagine if your taxes went up by 55%! People here keep saying there is no inflation and that’s because firms front run and stocked up. It will take time the same way if income taxes went up 20%, the impact isn’t felt all at once, it is felt paycheck by paycheck until you get to the end of the year and wonder where all the money went.
https://www.commercialappeal.com/story/money/2025/06/11/trump-china-trade-deal-how-tariffs-changed/84149576007/
Ok. So imports are about 12% of GDP. Imports from China are about 13.8% of all imports. To make it easy, lets assume a 50% tariff. That’s a 50% tariff or tax on about 1.66% of GDP. So an increase in taxes of 0.88% of GDP. Income taxes are about 10% of GDP. So i think the increase in tariffs would equate closer to taxes rising about 8%.
If the tax cuts are not extended, I think that might be a bigger hit to GDP than a 50% tariff.
I don’t think we will end up with 50% tariffs. Something under 20% is more likely. With an extension of tax cuts rather than expiring and having no tariffs, we will have taxes more on consumption rather than income.
I have always thought that taxing consumption is better economically.
I used China as an example but there are also steel tariffs and tariffs on the the rest of the world at the moment. Not as high but a tax nonetheless.
The real fundamental issue and I said this from the very beginning is the uncertainty. Put yourself in the shoes of a business owner and ask yourself how you can forecast anything not knowing how much materials or labor is going to cost you. How do you run your business in that type of environment?
If the tariffs go away, it gets a whole lot easier.
I am running a business and our biggest input costs are steel and aluminum. I do understand the uncertainty issue. It’s the same with changing tax policies. It makes investment difficult. Last time, a 10% tariff drove up the cost of materials about 3%. For us this raised costs 3% on 13% material cost. Not a killer but not pleasant.
I have no idea what tax policy will be for 2025. If we invest, what is the write down for tax? What is the tax rate? These are actually bigger issues for us.
Uncertainty makes everything difficult.
Good conversation!
As a steel and aluminum consumer, what percentage is available to your specifications from U.S. manufacturers?
I have a friend that owns a aerospace manufacturing company that can not buy the grades of metals he needs in the U.S.
He has long term contracts with ultra specific specifications and has to pay the tariffs on the raw billets. He is a U.S. business that is now at a disadvantage to his foreign competitors as the contained steel, aluminum or magnesium can now be manufactured for less and shipped to the U.S.
Remember the billet is what he pays the tariff for, not the weight of the finished product.
How does it work out for you?
Currently the tariffs are having minimal impact on us. All of the materials we are using are available from US suppliers.
We also are seeing defense business as some require US manufacturing.
From the tariffs, we have not seen any increase in US business but we have had inquires from European companies that want to find US based suppliers, No firm business yet but the lead time on these projects is generally 9 months to a year.
Hope you get more defense business.
Exchange rates, overseas weather events, volcanoes, international politics and wars, pirates and smuggling, elections.
Under this “uncertainty is too high” philosophy, with so many sources of uncertainty, it’s a miracle that there’s any international trade at all!
Reality is that corporate profits are at unrivaled record highs both nominally, adjusted for inflation, and as a percentage of GDP. The government is flat broke, and other than the stock-owning upper echelons, most of the population is struggling financially.
Under such circumstances, the corporate sector should be expecting policy uncertainty because Uncle Sam’s looking for money and “they’re where the money is”.
Steel is an enormous issue – and autos on top of that
I believe 25 percentage points is left over from Trump-Biden years
Not sure the exact percentage
Good question.
I inaccurately expected resolution in June.
But now final arguments on the stay are July 31 and a ruling in August.
This is for the short term inflationary and recessionary
But Bessent held back again.
So what will Trump do?
Are all taxes inflationary and recessionary?
According to the media, only taxes on corporations, high income people, their property or other accumulated wealth are “inflationary and recessionary”.
But then, the media’s revenue comes from advertising paid overwhelmingly by large corporations controlled by a small group of socially interconnected directors, so would you expect anything else?
(“It’s a Big Club – and you ain’t in it.”)
Conference Board Q2-2025: The vast majority of CEOs (83%) said they expect a recession in the next 12-18 months
Predictions are irrelevant unless there’s a proven track record. Are the CEOs taking time to opine to the Conference Board any good at predictions?
i doubt there is anyone in the world, who is NOT special needs, who think the Repugs are fiscally conservative. it does not even pass the LOL test in the past 65 years.
Record Debt Limit Increase Would Break Republican Precedent
A proposed $5 trillion debt limit increase could make it hard for Republicans to maintain their fiscal hawk credibility.
https://archive.ph/exVor#selection-4403.0-4407.120
Does that $5 trillion include war with Iran? That’s easily another $1 or $2 trillion.
A billion here, a billion there, pretty soon it all adds up.
Ah, but that was long ago and a more genteel time.
I think you’re short a digit. $10-20 T, I’d say.
They lost their fiscal hawk credibility long ago. Given the howling about DOGE’s trivial cuts there is no appetite for any spending cuts anywhere. It’s Thelma and Louise over the cliff time.
Why do you think gold was suddenly promoted to a tier one asset? Or that the Genius Act just passed with bipartisan support? Congress knows what’s coming.
Not to just dump on Republicans, I’ve heard nothing about an alternative plan from the Democrats except for Warren’s wealth tax. What does Schumer propose?
T-shirt circa 1985: Don’t blame me, I’m from Minnesota.
Funny thing about Reagan, though. His shtick was being tough, but he got us OUT of Lebanon. Trump should be Reaganesque in that way.
correct. and duly invaded grenada to keep the marines spirits up after being humiliated in lebanon. i concur with your assessment of the gipper. my pal was on beach, drinking beers as a med student, in grenada when the marines landed. he said it was a joke.
Reagan made a deal with the Iranians to hold the hostages till after the election. He was a traitor.
if anybody still believes the Republicans are fiscally responsible, they’ll believe anything
Anyone who ascribed “fiscal responsibility” to the GOP is either lying to themselves or is functionally economically illiterate