forecasts

The U.S. economy will be hampered by the Trump administration’s tariffs in the coming months, which along with interest rate cuts could lead to a “stagflation-lite” scenario of modestly elevated inflation and unemployment, according to the UCLA Anderson Forecast released Wednesday.

The fourth-quarter estimate also predicts that rising layoffs could lead to a recession, and if President Trump is successful in exerting more control over the Federal Reserve, a “full blown stagflation scenario becomes a more significant risk.”

“This forecast is being produced at a time when more extreme scenarios have become increasingly plausible, even though they do not yet represent our baseline outlook,” states the report by Clement Bohr, senior economist at the forecast.

UCLA’s report notes that the labor market “deteriorated notably” in June while inflation pivoted away from a path of “gradual normalization” onto a rising trajectory.

The quarterly forecast does not take into account the government shutdown that began Wednesday that could results in thousands of layoffs, but predicts third-quarter GDP growth will come in at just 1% on a seasonably adjusted basis, and it will weaken further as the full cost of the tariffs takes hold.

It expects growth to recover in the middle of next year and reach 2% by the fourth quarter, remaining there throughout 2027.

Driving the stagflation prediction is an effective tariff rate of about 11%, with the risk of future levies on pharmaceuticals and the potential lack of a resolution of the China trade dispute. The report notes the political pressure on Federal Reserve Chairman Jerome Powell and the decision by the bank to cut the federal funds rate by a quarter point in September. UCLA predicts a similar rate cut this month.

Trump’s “big beautiful” budget reconciliation bill passed in July, which included $703 billion in temporary tax cuts over the next four years starting in 2026, also will provide substantial stimulus. The Consumer Price Index is expected to peak at 3.6% in the first quarter of next year before easing.

However, the economy will be held back by a tightening labor supply caused by retiring baby boomers and restrictive immigration policies. The unemployment rate has crept up to 4.3% and is expected to peak at 4.6% early next year.

Also Wednesday, closely watched ADP Research released figures showed private-sector payrolls decreased by 32,000 in September with job growth slowing across many industries.

The billions of dollars being invested in artificial intelligence by large technology firms has helped prop up the economy, the forecast noted, which should result in productivity gains — but the capital expenditures should tail off as a “trough of disillusionment” sets in when revenue gains don’t meet expectations.

The report also expects consumer consumption to weaken following a surge in electric-vehicle purchases in the third quarter due to the expiration of federal tax credits last month.

Mark Zandi, chief economist at Moody’s Analytics, said if the government shutdown lasts a week or two it won’t have a “meaningful economic impact.” However, if it lasts for a month or more and is accompanied by mass federal layoffs, it would have a profound effect on the economy, Zandi said.

“It would wreak havoc on the financial markets as global markets and investors begin to wonder if we can govern ourselves,” he said. “That would mean higher interest rates and lower stock prices.”

Weather forecasts suggest Maiduguri and surrounding communities in Borno State, northeastern Nigeria, are set for reduced rainfall in the coming days, offering some relief to a city haunted by last year’s Sept. 10 devastating flood.

The chance of rain, which stood at 74 per cent last week, is expected to drop to 11 per cent today, easing pressure on the city’s fragile drainage systems and flood-prone neighbourhoods. ​According to AccuWeather, scattered showers are still expected, but without the intensity that typically triggers flash floods.

For residents, however, the reassurance is tempered by painful memories. Nearly half of Maiduguri was affected last year, with at least 150 lives lost, according to the National Emergency Management Agency, and over 400,000 people displaced. Critical infrastructure was damaged, livelihoods destroyed, and many survivors are still struggling to recover. 

The improved forecast offers hope, but Maiduguri’s long history of flooding means residents remain wary. Last year’s calamity was not caused solely by rainfall but by inadequate infrastructure, blocked drainage systems, and the dam’s failure. HumAngle reported extensively on the series of events that led to the flood. 

Babagana Zulum, the state governor, who visited the Alau Dam recently, assured residents that water levels are now stable after controlled releases since July.

“Based on current engineering analysis, there is no cause for alarm,” he told journalists.

Yet not everyone is convinced. Timothy Olanrewaju, a resident who was affected by last year’s flood, said the government’s assurance should be taken with a grain of salt.

“We can’t assume that just because the rain is easing compared to last month that we won’t experience flooding,” he said. “Two communities, 505 Housing Estate and Fori Layout, were flooded last weekend, even though there was no heavy rainfall in the city. The Ngada River simply overflowed its banks, and the water made its way into those communities.”

Like many residents, Timothy said he has yet to replace most of the items he lost in the last flood. “Even my car, which was submerged in the water for over a week, is still in terrible shape. I’ve spent a lot of money on it, but it’s not fully repaired,” he said, adding that he is still traumatised. 

“Every time I hear the sound of rain, I start to panic, thinking the flood is coming. A few days ago, I learned that some communities in the city were flooded, and it made me anxious. I began to worry that we would experience the same things we did last year.”

Residents take precaution

In the absence of certainty, some communities are taking matters into their own hands. At the State Low-cost Estate, one of the hardest-hit areas last year, residents have begun desilting their clogged drains during environmental sanitation exercises.

“We were blamed for the flooding we face here because of blocked drainage,” said Abdulkareem Mai Modu, a resident of the estate. “So, in order not to take any chances, we decided to pool our resources and clear all our waterways to avoid any disaster.”

Others, like automobile mechanic Yahaya Garba, remain displaced. ​“We are still taking temporary abodes at the homes of our relatives. I hope there will be a permanent solution to this annual calamity that comes to our homes,” he said. Yahaya’s home in Bulunkutu is still submerged from the recent excessive rainfall.

In the 505 Housing Estate, where floodwaters recently breached perimeter fences, resident Babagana Wakil described wading through knee-deep water.

​“Many residents to relocate as quickly as possible,” he said.

“The government needs to step up and ensure they monitor the flow of water and, when they see danger, pass on information to residents as quickly as possible so people can evacuate from flood-prone areas,” Timothy added.

Jet2 has said it will cut the number of seats available on its flights by around 200,000 in the coming months after the budget travel giant warned shareholders about earnings forecasts

Holidaymakers who rely on Jet2’s bargain fares will find fewer seats available in the coming months, after the budget airline received disappointing earnings projections.

The low-cost travel company is set to pull around 200,000 seats from the market over the next few months, leaving 5.6 million on offer during the winter period.

Whilst this still marks a nine per cent rise compared to last year, Jet2 has chosen to scale back its growth plans following predictions that the travel giant’s profits would fall short of expectations.

The news triggered a sharp decline in the company’s share price on Thursday, with analysts forecasting earnings of approximately £449m for the year ending March 2026, up from £446.5m the previous year. Stock values plummeted by roughly 13 per cent following the announcement.

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Jet2 revealed that cost-conscious travellers are increasingly displaying a “later booking profile”, snapping up flights at short notice and leaving the airline with “limited visibility” over passenger numbers during the winter months when many seats remain “still to sell.”

The low-cost carrier witnessed package holiday reservations climb by 2 per cent over the summer, which ThisIsMoney reports as a decline from the eight per cent surge recorded last year.

Nevertheless, these statistics also highlight shifting consumer behaviour, with flight-only bookings soaring by a substantial 17 per cent.

Jet2 CEO Steve Heapy informed shareholders that the concerning figures stemmed from “operating in a difficult market,” though he emphasised that their expanding customer base would “provide the foundation for a solid financial result this year and for further profitable growth in the years to come.”

The budget airline, which conducted its annual general meeting on Thursday, revealed it had introduced a “modest increase” in package holiday prices this summer and noted it would be premature to release “definitive” figures regarding the company’s overall profitability.

Last month, Jet2 became the first carrier in Britain to provide complimentary plane tickets to certain passengers, aiming to make their service more accessible for additional customers. All families travelling with a child under the age of two will now avoid purchasing a ticket for their little one, whether booking a package holiday or an individual flight.

Russ Mould, investment director at AJ Bell, explained to ThisIsMoney: “Millions of people prioritise experiences over material goods, with foreign holidays high up the list of things they scrimp and save for. Such a trend should be positive for airlines and holiday companies, yet countless individuals are leaving it to the last minute to make a booking.

“Jet2 has once again bemoaned this situation, leaving it with cloudy rather than crystal clear earnings visibility. Management cannot keep their fingers crossed that sales will eventually come through; they need certainty given the expense in running a fleet of aircraft and a complex accommodation chain.

“Guidance that full-year earnings will be at the lower end of market forecasts has wiped out Jet2’s share price gains so far this year. It’s a disappointing setback for the business and has dragged down shares in other airlines including EasyJet and Wizz Air.”