93% recession risk! UBS warns: the US economy has slipped into a weak zone

The Zhitong Finance App learned that UBS warned that according to “hard data” from May to July 2025, the risk of a recession in the US economy is as high as 93%. UBS describes the current condition as “stable but high risk”. In medical terms, this is like high blood pressure. It may not collapse right away, but it is dangerous. UBS has not officially predicted a recession, but it anticipates weak economic growth in 2025 and a possible recovery in 2026.

UBS said the signal had reached “historically worrying levels” and pointed to its past good record in identifying turning points in the economic downturn. An important red flag is the inversion of the yield curve, which indicates that the bond market is under pressure. The current level of inversion is 23%. It has been going on for several months, but it is far higher than the level at the beginning of 2025. UBS also emphasized the pressure on the credit market, saying that according to credit indicators, the possibility of a recession has risen to 41%, almost double that of January.

Signs of a slowdown in the US economy

“Fortune” magazine reports that many analysts said they are seeing more and more signs of a recession in 2025, which echoes UBS's warning. UBS explained that although the data looked weak, it was more like a “broad but not profound malaise”. Although the economy is weak, it has not yet collapsed. After a brief recovery at the end of 2024, the hard data turned negative again in February 2025 and has been weak since May, showing a trend of stagnation rather than a sharp decline.

UBS emphasized that none of the major economic indicators, such as employment or production, collapsed below the trend level, which in the past usually occurred before a recession. UBS's message is that the US economy is falling into slow growth or slight contraction rather than a sudden collapse. Analysts have warned that this could mean stagflation, where low growth and high inflation coexist, similar to what happened in the 1970s.

Recession risks and expert warnings

Although the recession risk index is as high as 93%, UBS has not officially predicted a recession. In contrast, UBS expects economic growth to be weak in 2025 and improve in 2026. UBS combined all signals such as hard data, yield curves, and credit pressure to determine that the probability of an overall recession in July was 52%, up from 37% in January. This level has historically been commonly associated with economic downturns.

UBS warned that the economy is currently at a “stagnant pace,” particularly after the July employment report showed a very weak recruitment situation, which raised questions about the stability of the economy. Other experts shared the same view. Moody's Analytics' Mark Zandy warned in August that the US was on the verge of recession. He pointed out that weak employment data and downward revisions were similar to previous recessions.

Zandy said that the biggest risk will come from the winter of 2025 to 2026, and the possibility of a recession is likely to occur at that time. He also pointed out that by the end of August, states accounting for one-third of the US GDP had fallen into recession or close to recession, while only one-third of the economy was still growing.

J.P. Morgan also sounded a wake-up call, saying that a sharp drop in labor demand is usually a “warning sign of economic recession” because this slowdown in employment growth often leads to layoffs. Overall, UBS and other economists say the US economy is weaker than a soft landing, but has yet to fully collapse, and 2025 is still on the brink of danger.