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American economy to turn more vulnerable: US experts

Experts warn of a new economic recession in the US. (file photo)

The US economy is faced with the threat of a new recession as it is becoming more vulnerable, American experts have warned.

According to Business Insider, the risk of a US recession over a two- to three-year horizon has "increased materially."

The latest report cited JPMorgan strategists making the prediction.

In a note titled "Is it safe?" published Thursday, the strategists said that 2016 is likely to see "pockets of stress," and that the US economic expansion is becoming "more vulnerable."

The report added that JPMorgan strategists are not the first to highlight the increasing risks of a recession.

Some of the biggest names on Wall Street, including Leon Cooperman, Jeff Gundlach, and Fed Chair Janet Yellen, have discussed the topic in the past couple of weeks, it noted.

JPMorgan economists Michael Feroli, Daniel Silver, Jesse Edgerton, and Robert Mellman, reportedly believe there is a three-in-four chance that there will be a recession in the next three years.

The key bit of their note says, “Our models suggest that US recession risks over a two- to three-year horizon have increased materially as a result of weak supply-side performance. US expansions don’t die of old age, but an environment of tight labor markets amid weak productivity gains and limited global pricing power signals that the expansion is becoming more vulnerable.”

The general tone from the rest of the note is to expect increased volatility through 2016, as central banks head in different directions.

One of the team's core views is that the growth gap between emerging markets and developed markets will close, with advanced economies benefiting from accommodative monetary policy and emerging markets suffering from a deleveraging cycle. That, they say, has the potential to be "disruptive."

The strategists add that they expect growth in China to stabilize, but that emerging-market economies in Latin America, Russia, and South Africa will still suffer from the slowdown.

The United States last plunged into a massive recession over financial instability and the subprime mortgage crisis in 2007.

Called the ‘Great Recession,’ America’s last economic meltdown was a period of general economic decline whose exact scale is still unclear.

According to the US National Bureau of Economic Research (the official arbiter of US recessions), it began in December 2007 and ended in June 2009, thus extending over 19 months.


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