Apollo Chief Torsten Slok Warns of Intensifying Recession Signals Across U.S. Economy

The U.S. labor market appeared resilient in February, with employers adding 151,000 workers according to Department of Labor data. Yet beneath this headline figure lies a deteriorating economic picture that has prompted serious warnings from top strategists. Torsten Slok, Chief Economist at Apollo, highlighted the troubling disconnect between headline employment figures and the underlying fundamentals driving market anxiety. “The soft data going into today’s number has been deteriorating, both when it comes to consumer confidence and corporate confidence,” Slok observed during a recent CNBC interview, pointing to early signs that both households and businesses are becoming increasingly cautious about near-term prospects.

The convergence of trade policy uncertainty, federal spending pressures, and inflation headwinds has created a precarious environment that extends far beyond what monthly job statistics can capture. Torsten Slok’s assessment reflects a broader consensus among economists that multiple downside risks are intensifying simultaneously, with limited visibility into how policy shifts will ultimately reshape the economic landscape.

Economic Indicators Flash Deteriorating Trends Despite Job Numbers

While the 151,000 jobs added in February came in slightly below economist expectations of 160,000, the real concern centers on forward-looking indicators. Capital expenditure plans tracked by regional Federal Reserve districts are beginning to roll over, suggesting corporate investment appetite is waning. This development aligns with Torsten Slok’s broader concern that both consumers and corporations are reassessing their growth outlook in light of policy uncertainty.

The market has already begun pricing in these concerns. The Magnificent 7 technology stocks, particularly NVIDIA, experienced a sharp selloff last week, catalyzing a broader rotation out of growth-oriented assets. The VIX volatility index surged above the 20 level, a historical marker for elevated market caution and a shift in investor positioning toward defensive strategies.

Trade Policies Reshape Market Expectations and Business Investment

The Trump administration’s aggressive tariff regime stands as a primary driver of this economic uncertainty. Tariffs affecting 44% of U.S. imports from Canada, Mexico, and China have already produced measurable disruption. Most notably, official trade data revealed an extraordinary $37 billion monthly deterioration in the trade deficit—a swing exceeding twice the typical month-to-month variance observed over the preceding five decades. The broader trade imbalance reached $131.4 billion in January, marking a record-high level.

These tariff measures have triggered tangible business responses. Companies are accelerating imports ahead of anticipated tariff increases, with industrial supplies imports surging 34% as firms attempt to stockpile before duties take effect. The Atlanta Federal Reserve has adjusted its first-quarter growth forecast downward to -1.5%, reflecting the severity of expected fiscal headwinds.

Jonathan Millar, senior U.S. economist at Barclays, conveyed the widespread uncertainty permeating economic forecasting: “Given this is so uncertain and that there are new announcements every hour or so, it’s kind of unclear what the environment is going to look like. It’s hard to deny the risk of a recession has intensified.” His assessment captures the fundamental challenge: ongoing policy announcements create a moving target for business planning and consumer decision-making, feeding postponement of spending that translates into economic drag.

Federal Workforce Cuts Pose Broader Sentiment Risks

Beyond direct tariff impacts, proposed federal spending cuts introduce another layer of uncertainty. Torsten Slok calculates that the federal government directly employs approximately 3 million people, with an additional 6 million contractors, creating a federal-linked workforce of roughly 9 million—representing about 5.6% of total U.S. employment.

While immediate layoff impacts may prove limited, Slok emphasizes the broader psychological dimension: “This spreading of the sentiment that people begin to pull back and in the worst case say ‘well maybe we shouldn’t be spending so much in the household sector’, and maybe corporate will also say ‘well maybe we shouldn’t hire, if there’s such an elevated level of uncertainty.’ That could be the real risk where things could really begin to accelerate.” This sentiment multiplier effect—where government workforce uncertainty triggers broader consumer retrenchment and corporate hiring hesitation—represents the primary concern beyond any direct employment losses.

Inflation Pressures and Market Rotation Signal Heightened Caution

Trade policy uncertainty also introduces upside inflation risks. Wells Fargo research indicates that short-term inflation expectations are recalibrating in response to tariff announcements, with consumers increasingly aware of price pressures stemming from trade policy. The New York Federal Reserve reported that year-ahead business inflation expectations ticked upward in February to 4.0% among service firms (up 1.0 percentage point year-over-year) and 3.5% among manufacturing firms (up 0.5 percentage points), reflecting broad-based expectation shifts.

The uncertainty is simultaneously depressing business investment activity. Mergers and acquisitions activity during the year’s opening months reached its weakest level since the 2008-09 financial crisis, according to Charles Schwab research. Liz Ann Sonders, chief investment strategist at Schwab, noted that earnings season commentary emphasized tariff concerns at unprecedented levels: “You did see throughout the course of earnings season, a record mention of tariffs on earnings conference calls, even to a higher degree than the peak that we saw during the 2018 trade war.”

Biotech acquisitions have particularly stalled, with smaller companies typically relying on larger players for growth. The Nasdaq Biotech Index has declined more than 9% from recent highs as M&A momentum evaporated. This slowdown in deal-making reflects the broader hesitation gripping corporate leadership.

Outlook: Managing Uncertainty Without Clear Resolution

The February employment report fails to alleviate mounting economic apprehension. Instead, it underscores a central tension: traditional labor market resilience indicators diverge sharply from forward-looking measures of confidence and investment intentions. Torsten Slok’s framework for understanding these dynamics—emphasizing the sentiment channels through which policy uncertainty propagates into broader economic contraction—provides a coherent explanation for why corporate caution and consumer hesitation may intensify despite near-term labor market stability.

As Wells Fargo summarized the challenge facing market participants: the only certainty regarding tariffs remains uncertainty itself. Until policy direction clarifies, expectations for both corporate spending and household consumption may continue deteriorating, creating conditions that could accelerate recessionary pressures across sectors.