Gloomy Outlook for the US Economy: Projections from JP Morgan and Morgan Stanley

JPMorgan (JPM) forecasts a slight slowdown in US economic growth, a limited increase in unemployment, and core PCE inflation remaining above 2% for 2025. The bank expects the economy to grow by 2%, considering this as a performance that is free from recession risk. The unemployment rate is projected to rise to 4.5%. Core PCE inflation is anticipated to decrease by half a percentage point to 2.3% in 2025.

JPMorgan predicts that the Federal Reserve will make a 25 basis point rate cut in December, reducing the total interest rate by 100 basis points to 3.75% by the end of the third quarter of 2025. With a slowdown in labor supply, job growth is expected to fall below 100,000 per month in 2026, but it is noted that there will be no recession risk due to a decrease in labor demand as well. The bank also anticipates a sharp increase in tariffs imposed on China and a slowdown in trade volumes.

Effects of Trump Tariffs on the US Morgan Stanley (MS) Chief Global Economist Seth Carpenter stated that the tariffs proposed by Donald Trump would significantly reduce the economic growth of the US towards 2026. In an interview with CNBC, Carpenter emphasized the importance of the timing and pace of these tariffs, warning that their implementation at once could create "a major negative shock" to the economy.

Morgan Stanley's baseline scenario maintains the idea that tariffs will be spread over 2025, predicting that this would increase inflation. Carpenter noted that these tariffs would exert pressure on economic growth and inflation. Analysts express that while the US economy shows strong performance in terms of the business cycle, it faces downward risks due to uncertain policies and tariffs.