U.S. Economy Faces Recession Risk as Job Growth Revised Down by 911,000

The U.S. economy has come under intense scrutiny following a significant downward revision in employment data. The Bureau of Labor Statistics released preliminary results of its annual benchmark revision, revealing that the U.S. added 911,000 fewer non-farm jobs over the past 12 months ending in March 2025 than previously estimated. This translates to an average monthly reduction of 76,000 jobs, a revision not seen in over two decades.

This substantial adjustment has sparked concerns among economists and market analysts, who had previously praised the resilience of the U.S. economy and the strength of its job market. The revision suggests that the economy may have been in a recession or at risk of stagnation since as early as April 2024. The Chief Economist noted that the data confirms a slowing economy, stating, "I'm not sure if it's just slowing down or heading into a recession."

Recent employment data has shown a troubling trend. In August, the U.S. added only 22,000 jobs, far below the expected 70,000 and the average monthly gain of 29,000 over the past three months. This trend was evident as early as June, when the job market experienced its first monthly decline since December 2022. The downward revision in employment data has made the economic slowdown more apparent, coinciding with high inflation and rising unemployment rates, indicative of a potential stagflation scenario.

The Federal Reserve faces a delicate balancing act in its upcoming meeting. Aggressive rate cuts could exacerbate already high inflation, while cautious cuts risk deepening the recession in the fragile labor market. This tension is evident in the bond market, where the 10-year Treasury yield rose by 4 basis points to nearly 4.1%, and the 30-year yield reached 4.7%. The initial rally in bonds, driven by expectations of rate cuts, has stalled as traders brace for potential economic downturn or stagflation.

Later this week, the U.S. will release key inflation data, including the Consumer Price Index (CPI). If the CPI shows worsening inflation trends, markets may start to worry about stagflation. The Chief Investment Officer of a major asset management firm warned that while the U.S. stock market has shown resilience this year, it may be approaching a turning point, testing the bull market's endurance. Market consensus expects the core CPI, which excludes volatile categories like food and energy, to rise 0.3% month-over-month and 3.1% year-over-year, well above the Federal Reserve's 2% target.

Economists predict that inflationary pressures will persist, with higher tariff costs being passed on to consumers, a trend expected to continue through 2025. A major global bank recently warned that based on hard data from May to July, the U.S. economy faces a 93% risk of recession, describing the current situation as stable but high-risk, akin to high blood pressure—dangerous but not immediately catastrophic. Another prominent economist had earlier warned that the U.S. economy is on the brink of recession, with weak job data and downward revisions mirroring past economic downturns. As of the end of August, 22 states had economic recession warnings, with nearly a third of GDP already affected. The greatest risk is anticipated between the winter of 2025 and 2026, with a 50% chance of a recession during that period.