Economists Predict Increased Layoffs and Recession Risks in the US

As the US economy grapples with significant challenges, it increasingly mirrors the economic scenario in China, where heavy government debt once played a pivotal role in sustaining growth.

by Faruk Imamovic
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Economists Predict Increased Layoffs and Recession Risks in the US
© Getty Images/David McNew

As the US economy grapples with significant challenges, it increasingly mirrors the economic scenario in China, where heavy government debt once played a pivotal role in sustaining growth. According to Danielle DiMartino Booth, a veteran forecaster and chief strategist at QI Research, the US might already be in the throes of a downturn, contradicting the more optimistic projections from Wall Street of a gentle economic decline.

The Job Market: Signs of Stress

The job market, while strong by historical standards, has begun to show signs of weakening. Despite the addition of 303,000 jobs in March, which surpassed expectations, the employment landscape is not as robust as it seems.

Recent adjustments have seen the number of new payrolls in February revised down to 270,000. Furthermore, layoffs and unemployment rates have seen a slight uptick in recent months, with total discharges rising to 1.7 million as of February, data from the Bureau of Labor Statistics indicates.

"These revisions, they keep pushing us back further and further from where we thought we were," Booth explained in an interview with Fox Business. She highlighted an emerging trend in corporate America where earnings reports are often accompanied by announcements of significant layoffs, which could see figures rising from 150,000 to 370,000 by the end of the year.

Debt Concerns and Economic Similarities with China

The US's rising debt levels are becoming a cause for concern, drawing unsettling parallels with China's past economic strategies. At one time, state-owned enterprises in China contributed as much as 60% of the country’s GDP.

Booth pointed out the significant similarities between the American and Chinese economic models, stressing that the increasing public sector involvement in the economy could be detrimental. "It is not different in any way, shape, or form," Booth remarked about the similarities.

"Right now, the public sector is sucking the life out of the private sector," she added, advocating for reduced government spending to allow the private sector to drive economic growth. The federal debt balance has reached a record high of $34.5 trillion, according to Treasury Department data.

Experts warn that if these debt levels continue to rise, the US could face higher inflation, greater market volatility, and a decreased quality of life for its citizens.

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