Why budget restraint matters: Predictions of Q2 slowdown show growth well below Q1 pace; heightened recession anxiety.

Friday we commented on the weaker-than-anticipated employment and wage figures for May.  Calculated Risk has pulled together forecasts of Q2 GDP growth from Merrill Lynch, the New York Fed, and Atlanta Fed. The conclusion:

These early estimates suggest real GDP growth will be in the 1% to 2% range annualized in Q2.

That’s well below the 3.2 percent growth in Q1. And Menzie Chinn at Econbrowser reviews some projections and writes,

Different forward looking models show increasing likelihood of a recession.

During the legislative session, we warned of unsustainable budgets proposed by the governor, House and Senate. We wrote that three-quarters of business economists expect a recession by end of 2021; nearly half see it beginning next year .

And we continue to be concerned that the adopted budget with an 18.3 percent expenditure growth built on volatile taxes will be at risk in a downturn. The latest news heightens our concerns.