Barclays' Michael Gapen is sharing Wall Street's renewed recession concerns ahead of Friday's monthly jobs report.
The firm's head of U.S. economic research expects employment will be a decisive factor of whether the economy contracts within the next 12 months.
Since the beginning of the fourth quarter on Tuesday, the Dow has plunged more than 800 points or 3% after new data showed manufacturing hit its lowest level in a decade. The Dow and S&P 500 are still about 5% off their all-time highs.
"Based on the data that we have on hand and understanding how the economy tends to evolve, we would put the number around 25 to 30% chance over say the next four-quarter horizon," he said of the chances for a recession.
In any given year, Gapen estimates there's a 10% chance of a recession. He suggests 2019 is no ordinary year.
Gapen sees the next crucial batch of economic data will come from the labor market. He believes it will provide valuable information into the strength of personal spending, which is about 70% of the economy. If personal spending stalls, it would drive recession odds even higher, Gapen warns.
"We need to see things like where is employment to understand where consumption will be," he said.
According to FactSet, the Street is expecting September's unemployment rate to hold steady at 3.7% with nonfarm payrolls growing by 150,000 versus 130,000 in August.
"We think risks are distributed to the downside where we can get a surprise in any one of these numbers," Gapen said. "It could shift sentiment pretty quickly."