‘We are already in recession, or dangerously close to it’: Daniel Jones

Daniel Jones, Analyst and Financial Newsletter Director Insights into oil valuewarns that the U.S. economy is showing increasing signs of deterioration and could slip into a recession in the coming months.

The report, released on May 19, 2026, compiles indicators for employment, manufacturing, transport, consumption, investment, and public debt.

Unless there are fundamental changes, Jones said, “a combination of factors, including tariffs, inflationary pressures, expensive oil from the war with Iran, and continued high interest rates, will push the United States into recession in the coming months.”

let’s remember that Strait of Hormuz closed due to conflict between US and Iran It is an important route through which almost 20% of the world’s oil circulates. Prolonging the conflict could maintain pressure on oil prices, increase energy prices and trigger new inflationary pressures.

For the U.S. economy, this means a double problem. Consumers and businesses face rising costs; On the other hand, if inflation picks up again, the Federal Reserve will have less room to cut interest rates.

In this regard, he admitted that he was “hoping I was wrong” because he does not want a recession, adding:

So I decided to analyze the new data. What began as a study of the manufacturing industry has evolved into a broader assessment of current economic conditions. Contrary to hopes of a revival of American manufacturing, we are seeing the opposite.

Daniel Jones, analyst and director of financial newsletter Crude Value Insight.

Manufacturing and employment show weakness

Jones acknowledged that some manufacturing indicators are technically still expanding. To expand on his point, the analyst shared a graph of the Purchasing Managers Index (PMI). This index measures the level of activity in the manufacturing sector, based on a survey conducted among industrial companies in the United States.

Levels above 50 indicate expansion, and levels below 50 indicate contraction.

Currently, the indicator is barely above that area, but this could be interpreted as a positive sign. in fact, The manufacturing PMI has been above 50 for four consecutive months, a number typically associated with economic expansion.

But Jones believes the problem appears “beneath the surface” of aggregate data. “What’s frankly disturbing is that even areas that are still growing are showing clear signs of slowing down,” Jones said.

According to analysts, The deterioration appears mainly in more sensitive variables, especially employment.

The graph above compares the year-on-year changes in employment in the manufacturing and construction industries. There, we see that manufacturing has virtually continuously destroyed jobs since the beginning of 2024.

Meanwhile, the construction industry has lost much of the momentum seen in 2024. “Even the parts of the economy that are still showing growth are starting to weaken,” the newsletter’s director said. Insights on oil pricesprimarily focused on the oil and gas sector.

AI supports some of the growth

One of the central points of the report is that Huge investments in artificial intelligence (AI) will mask a broader slowdown in other areas of the economy.

The following table shows how much categories related to technology and artificial intelligence contribute to real GDP growth in the United States.

In 2025, software will contribute 0.35 percentage points to economic growth. Computer processing equipment, 0.42 points. Research and Development, 0.13. Data Center, 0.07.

This comparison is intended to show that current technology investments have a similar weight to the economy as that observed during the dot-com bubble of the early 2000s.

Jones added that about 39% of current U.S. GDP growth is tied directly or indirectly to artificial intelligence-related investments, citing an analysis by the Federal Reserve.

Along these lines, he considered this to be concerning. Because “the fact that AI is mobilizing huge amounts of capital while employment and manufacturing investment are deteriorating is alarming.”

According to analysts, this strengthens the idea of ​​a possible “bubble” related to AI. He warned that “even deeper weaknesses are hidden in other areas of the economy.”

This issue was also highlighted in the Citrini Research report signed by analyst Arup Shah and published in February 2026. The following extreme scenarios are proposed: While AI does promise productivity, it will ultimately have a negative impact on the real economy and labor market.

“In an economy that relies on human work to sustain consumption, credit, and profits, it is not a problem for AI to fail, but it is a problem for it to work too well,” the analysis summarizes.

According to Citrini, when administrative and professional tasks are automated on a large scale, a “ghost GDP” phenomenon can occur. Economic growth and corporate profits reflected in statisticsHowever, there is no equal circulation of income between households.

Although this is a hypothetical scenario and not a formal prediction, the report agrees with Jones on a central point: Artificial intelligence’s current strengths could be: They coexist with a real economy that is much weaker than what financial markets reflect.

American consumers begin to go bankrupt

In another section of the report, analysts talked about the financial deterioration of American households.

The graph above shows that credit card delinquencies reached 13.1% (blue bar). Auto loan (green bar) They amounted to 5.6%, making it a historical record as comparable records exist.

The same was true for other consumer debt (gray bars), excluding mortgages, mortgage lines of credit, and student loans, which amounted to 9.8%.

Jones also points out that more car buyers are taking out loans.underwater”, meaning you owe more than the car is actually worth. Consumer deterioration is becoming visible in various sectors of the economy.transportation industry and temporary employment.

To do this, Jones cites the following index: cas cargo shippingmeasures U.S. freight traffic and serves as a reference for real economic activity.

The graph compares the evolution of cargo shipments over the annual period (blue bars), two years (green), and three years (gray) from the beginning of 2024 to April 2026.

The data continues to show a negative trend. For example, shipments in April 2026 recorded a 4.4% year-on-year decline, while the decline reached 7.9% in the two-year comparison and 11.6% in the three-year comparison.

For Jones, this reflects the fact that fewer and fewer goods are circulating within the U.S. economy. This is usually a signal associated with a slowdown in consumption, a decline in commercial activity, and weakening business demand.

Analysts believe the continued weakness in transportation is particularly worrying after the post-pandemic logistics boom and even as investment in artificial intelligence continues to grow strongly.

Similarly, Jones considered the decline in temporary employment to be concerning. Historically, this indicator tends to worsen before recessions Companies will be the first to cut short-term employment. when demand begins to decline. The graph below shows a continued downward trend from 2022 onwards.

To Jones, the current economic downturn already looks more like a recession scenario than just a slowdown. “Given how far this indicator has fallen, it appears we are already in recession, or dangerously close to it,” he said.

Deficits, debt, and diminishing bailout space

The report concludes with a warning about the U.S. fiscal situation, saying the U.S. budget will grow from 99.4% of GDP in 2025 to 120.2% in 2036, and the budget deficit will continue to widen.

According to data cited by Jones, The annual deficit is expected to rise from 5.8% of GDP in 2025 to 6.7% over the next 10 years.. At the same time, structural items such as social security, health care, and especially debt interest payments will increase.

For analysts, this would greatly reduce the U.S. government’s room for maneuver in the face of a possible recession. “Government is becoming increasingly constrained by a combination of low taxes and high spending,” he wrote.

Jones said that unlike recent crises, such as those caused by the 2008 and 2020 pandemics, The U.S. could face another economic downturn due to historically high debt levels and a budget deficit that was already widening even before entering a formal recession.. In these episodes, governments were able to respond with large fiscal and monetary stimulus packages. Now, analysts say that margin will get even smaller.

“When the private sector weakens, governments can usually intervene by creating demand until the economy recovers,” he explained. However, today this ability is considered to be declining due to the increasing financial and financial weight of the state.

Even so, the report itself acknowledges that historically the United States has been successful in aggressively increasing spending and liquidity even in the face of high debt, especially during financial crises and deep recessions.

Jones acknowledged that if economic conditions deteriorate significantly, “substantial government intervention is very likely.” But the problem, he clarified, lies elsewhere: “The fact that governments are already facing these limits at a time when economic conditions are deteriorating.”

However, the United States has historically been able to aggressively expand spending and liquidity even when heavily indebted, especially during financial crises and deep recessions.

Jones is not alone in issuing such warnings.

Other economists have been warning of similar signs of a slowdown for months.

As previously reported by CriptoNoticias, Henrik Seberg, the Swiss bloc’s chief economist, has been warning since December 2025 that “the economy is slowly sinking.” The U.S. is entering a period of continued labor and consumer weakness.although still driven by liquidity and financial euphoria.

In contrast, while these indicators show deterioration, the US stock market It remains near all-time highs, largely due to enthusiasm around AI.

However, Jones believes that strength can be deceptive. “Even the parts of the economy that are showing signs of growth are already starting to collapse,” he warned.

Charles Edwards, CEO of Capriol Investments, echoed that view, warning on May 20 that when inflation reaches current levels, the S&P 500 historically faces a major correction in the months that follow.

For Edwards, risk is not just about economic activity; However, they also point out that markets are pricing in excessive optimism in the face of a still fragile inflation situation.