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Not to spoil the afterglow from last week’s blockbuster report on job growth in June, but some economists are still fretting about the rising risk of recession.

The employment report appeared to alleviate worries of a downturn that had built after two straight months of feeble payroll gains and market fallout from the United Kingdom’s vote to leave theEuropean Union. It showed that employers added a booming 287,000 jobs last month.  Meanwhile, stocks have more than recovered their Brexit-related losses and are at record highs. And most analysts estimate the economy grew a solid 2.5% to 3% in the third quarter.

But economists are a wonky lot and they’re focused on an armada of more subtle indicators that are flashing yellow. UBS puts the risk of recession at 34% within the next 12 months, up from 23% a year ago, and JPMorgan Chase gives it 37% odds, both high marks for the firms in the recovery

That doesn’t mean a recession is in the cards, but it does suggest that the U.S. economy could be more vulnerable to a negative shock, such as an escalation of economic troubles in China, says UBS credit strategist Stephen Caprio,

Here are some of the concerns:

• Slowing job gains. Yes, employment growth rebounded in June, but monthly gains are still averaging just 147,000 the past three months and 172,000 so far this year, well below last year’s 229,000 pace. Many economists cite a natural slowdown now that the below-5% unemployment rate is supplying employers with fewer available workers.

But Barclays Chief U.S. economist Michael Gapen says marked drop-offs in payroll gains from the recovery average typically herald recessions nine to 18 months later. He adds, however, that another strong jobs tally in July could ease such fears.

As employers compete for fewer workers, they typically raise wages more sharply, stoking consumer spending and making up for the slower job growth.  But while wage gains have picked up modestly, Deutsche Bank says they may remain subdued because of sluggish labor productivity.

• Shrinking profits  The second-quarter earnings season, which gets underway today, is expected to show that profits fell for a fourth straight quarter, an ongoing “profit recession.” Historically, profit recessions often, though not always, presage economic slumps.

• Tighter credit. Banks toughened their credit standards for the third straight quarter in the first three months of the year, according to a Federal Reserve survey. Meanwhile, high-yielding debt for riskier companies is near record levels; high-yield bond issuance is down 35% this year; and yields on such “junk” bonds have risen to 6.7% from about 4.7% in early 2014, Caprio says. That, he says, could lead to higher default rates for such debt, prompting banks to further rein in lending and curtailing economic activity.

• Slowing auto sales. Auto sales fell 5% in June, according to a report last week. Declining car sales can be a reliable indicator of coming recession, Edgerton says. Monthly counts can be volatile but Deutsche Bank notes that annualized sales also fell in the second quarter to 17.1 million from 17.3 million in 2015.

• Global weakness. The UK’s vote to leave the EU will likely nudge Britain into recession and has increased the risk of recession in the euro area, Goldman Sachssays. That further weakens an already sluggish global economy that has hurt U.S. manufacturers’ exports.

Other economists don’t foresee a recession. “I’m not seeing any (bubbles in the economy)” that would cause the Fed to raise interest rates rapidly — a typical recession trigger, says Jim O’Sullivan of High Frequency Economics.


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