UCLA predicts economic downturn linked to Trump's policies

The UCLA Anderson Forecast has issued its first-ever "recession watch" due to significant economic changes from Trump's policies. The forecast was released on Tuesday and highlights how tariffs, immigration policies, and reductions in the federal workforce could lead to an economic downturn. Currently, there are no signs of an imminent recession, according to the Business Cycle Dating Committee of the National Bureau of Economic Research. This committee monitors various economic indicators such as production and employment to determine if the economy is shrinking. As of now, these indicators do not suggest a recession is occurring. A recent CNBC Fed Survey showed a 36% chance of a recession within the next year, an increase from 23% the previous month. However, this is still lower than the 50% probability marked during the pandemic years of 2022 and 2023. Many forecasters on Wall Street do not expect a recession as a base case but acknowledge growing concerns. UCLA Anderson warns that Trump's immigration policies may create labor shortages while tariffs could raise prices and hurt manufacturing. Changes in federal spending might also reduce jobs for government workers and contractors. If these factors happen simultaneously, they could lead to a recession. Administration officials have not strongly denied the possibility of an economic downturn. President Trump mentioned there would be a "period of transition," while the Commerce Secretary stated a recession might be "worth it" for future benefits. The report from UCLA suggests that weaknesses in household spending are starting to show, warning that the recession could be accompanied by stagnation and inflation, known as stagflation.