Where Do We Stand?

Predicting a recession is famously difficult. Right now, a recession is not the base case for either the US or Europe, but confidence in this view remains low.
Key factors include:

• China tariffs: Even if rates fall from 145% to around 50-60%, Chinese goods would still be expensive, encouraging companies to continue relocating supply chains.
• Manufacturing weakness: Surveys like the ISM are expected to show ongoing weakness, but manufacturing is no longer the main driver of the economy.
• Consumer vulnerability: Unlike the Covid era, consumers now face lower savings, higher delinquencies, and weaker confidence.

Still, strong balance sheets, especially among the wealthiest 20 percent, have helped keep the economy afloat.

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Upcoming Data and Its Implications

Next week’s economic data will be noisy due to frontloaded imports, which means:

• GDP growth could be close to zero.
• Manufacturing and delinquencies are no longer reliable recession signals.
• Focus shifts to the jobs market for early warning signs.

Key Warning Signs to Watch

• A spike in layoffs, mainly in the government sector.
• Stability in private-sector jobless claims (so far).
• Negative payroll numbers would be a serious recession signal.

The Fed’s dilemma:
If payrolls turn negative, the Fed may feel pressure to cut rates — but rising inflation could limit its ability to respond.

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United States: What to Expect This Week

Consumer Confidence (Tuesday)

Expect a sharp fall in consumer confidence:

• The University of Michigan survey already showed a big drop.
• The Conference Board’s measure is unlikely to look better.
• Key pressures on consumers:
  • Higher prices due to tariffs.
  • Fear of job losses and benefit cuts.
  • Falling stock and bond prices eroding household wealth.

Big Question:
Will weaker consumer confidence ripple into broader economic slowdown, hitting your income or investments?

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GDP Report (Wednesday)

The first-quarter GDP report will reveal the extent of the slowdown:

• Growth is expected to be very weak.
• A surge in imports earlier this year (ahead of tariff hikes) dragged down growth.
• Consumer spending and business investment might have barely kept GDP positive.

Big Question:
Are you prepared for a potential recession in the second half of the year?

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Jobs Report (Friday)

April’s jobs report is crucial:

• Hiring is slowing as businesses grow cautious.
• Few layoffs yet, but the pace of new hiring is cooling rapidly.
• Payroll growth will slow; the unemployment rate could edge higher.

Big Question:
Will it become harder for companies to expand — or could job competition heat up for you personally?

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Canada: Political Shifts Amid Economic Uncertainty

Canada’s political scene shifted dramatically:

• Donald Trump’s comment about making Canada the 51st US state rattled the Conservative Party, leading to a collapse in support.
• Mark Carney, former Governor of the Bank of Canada and Bank of England, revived the Liberal Party’s energy.

Key Takeaways

• No matter who wins, the next Canadian government faces big challenges.
• 75 percent of Canadian exports go to the US.
• A prolonged US-China trade war could badly damage Canada’s economy.

Big Question:
How will Canada’s political shifts impact your investments or business decisions?

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Final Thoughts

While an official recession isn’t the base forecast, the risks are rising quietly and could emerge suddenly.
Smart investors and businesses are watching consumer sentiment, payroll numbers, and global trade developments closely.