Donald Trump’s assault on the US federal government and the world’s interlinked manufacturing system have together reached an economic tipping point.
“It seems almost unavoidable that we are headed for a deep, deep recession,” said Jesse Rothstein, Berkeley professor and former chief economist at the US labour department.
Once the pace of job losses crosses a critical line, the multiplier effects can snowball suddenly.
Prof Rothstein said monthly non-farm payrolls – the barometer of US economic health watched closely by markets – could turn viciously negative by late spring, contracting at rates surpassed only during the worst months of Covid and the Lehman crisis in 2008.
“I think we’re going to see historically large drops. Losses of 400,000 a month are not implausible because people are getting nervous out there.
“It is not just the federal employees being fired: it’s all the other people worried they could be next, so they are cutting back too,” he told The Telegraph.
Torsten Slok, of Apollo Global, said layoffs could approach 1m after factoring in the likely chain reaction through contractors. “We are starting to worry about the downside risks to the economy and markets,” he said.
Mr Slok said it is a mystery as to why credit spreads and equities are still so well-behaved when the US Economic Policy Uncertainty Index was now higher than at any time during the great recession.
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