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Economic Update: Things are still getting bad; apparently Wall Street is taking medication [1]
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Date: 2025-04-16
Putting numbers on that:
Our February 19 Forecast stands. “The Crash is coming; how big is not clear, but big. Soon. Keep your calendar clear for early summer.” (Kos, 2/19/25) According to the Atlanta Fed’s GDPNow, GDP is already shrinking at -2.0 percent and has been since the first week of March. It is very possible, when the recession is certified, it will be marked as starting around March 3. The shock of Trump attacking the government with Musk’s chainsaw and his own, typically illegal, cancellations and freezes was only an early warning. Subsequently he has displayed that the rule of law, military alliances and trade agreements are so much worthless paper to him. On-again, off-again, tariffs and potential insider trading by his entourage seriously damage the credibility of markets themselves. And it is not over. In fact, chaos is the new status quo.
“Big” we now define as -4.5 to -6.0 growth by December 2025. Unemployment of 5.1 to 6.8 percent by the end of the year.
We got here with some simple assumptions: (1) A drop of 20% in spending on consumer discretionaries, (2) a drop of 20% on consumer durables, (3) a drop of 5% on consumer food spending, (4) a rise of 6% in inflation on non-energy, (5) a drop of 10% in inflation on energy. Baseline forecasts were: Real GDP growth: 1.9–2.2% (CBO: 1.9%, Deloitte: 2.6%); Unemployment rate: 4.4–4.6% by year-end (CBO: 4.4%, S&P: 4.6%).
So it’s not like we’re stirring the cauldron of gloom to come up with these numbers. It could go even lower. The real puzzle is still why other forecasters are more sanguine. (It might be meds.) Although the blue chip band in GDPNow is getting below zero on growth. For some reason a new nowcast from the Atlanta Fed is coming tomorrow, one day after this one.
But look at these charts from the April FDNY The Empire State Manufacturing Survey
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