Recession odds edge lower; SoftBank eyes trillion-dollar AI robotics hub; Jobless claims decline

Lower-than-expected effects from trade tariffs have spurred some economists to downshift chances of a U.S. recession this year, though analysts are on guard for potential inflationary fallout from higher Middle East tensions on fuel and other costs.

Oxford Economics’ in-house business cycle indicator, based on several metrics, shows the economy is losing steam “but is still far from signaling a recession as the hard economic data hasn’t weakened significantly,” the forecasting firm said in a statement Friday.

“We estimate the recession odds have dropped to 35%, which is still elevated because the probability of a recession is 15% in any given year,” said Oxford Senior Economist Matthew Martin, noting the Federal Reserve will remain in wait-and-see mode until tariff impacts on prices are better understood. The Fed left interest rates unchanged at its latest meeting.

Martin said escalating Middle East tensions between Israel and Iran represent “another adverse supply shock to the economy,” with the potential to cause annual inflation to peak near 6% in a “severe scenario.”

The Conference Board said its latest May index of leading economic indicators declined a slight 0.1% from the prior month but has fallen 2.7% over the past six months. The economic research group said May’s stock price recovery was a positive factor but was offset by rising consumer pessimism, slowed manufacturing orders and declining housing construction permits.

Global investment giant SoftBank, which holds significant real estate stakes, is reported to be planning what would be a trillion-dollar industrial complex in Arizona focused on building industrial robots and other technologies tied to artificial intelligence.

Citing sources familiar with the matter, Bloomberg said SoftBank founder and CEO Masayoshi Son is seeking to partner with Taiwan Semiconductor Manufacturing Co. to develop an Arizona version of an existing large high-tech manufacturing hub in Shenzhen, China. Goals include increasing U.S. production of AI-powered industrial robots.

TSMC recently started chip production at a large new plant in Phoenix and has more facilities planned in that region. Bloomberg said SoftBank officials have had initial talks with federal and state government officials on possible tax breaks for an AI robotics industrial park in Arizona.

SoftBank did not immediately respond to requests from CoStar News to comment, and TSMC declined to comment when reached by email. Tokyo-based SoftBank is among several companies that previously announced significant planned investments nationwide in new facilities geared to boosting domestic production of computer chips and related tech components. 

Initial U.S. claims for unemployment insurance totaled 245,000 for the week ended June 14, down 5,000 from the prior week’s revised level, the Labor Department reported. But analysts noted initial claims were up significantly from May, reflecting slowed hiring across several industries as layoffs remain elevated.

“Despite the slight decline in initial jobless claims in the week ending June 14, both initial and continuing unemployment claims are trending higher, consistent with a gradual softening in labor market conditions,” Michael Pearce, deputy chief U.S. economist at forecasting firm Oxford Economics, said in a statement.

Pearce said jobless claims by former federal workers remain low relative to February levels. Based on recent rulings on pending federal layoffs being contested in courts, Oxford Economics has shifted its forecast of the timing of larger-scale federal job cuts later into this year.