He added that by that definition, the US economy is not in a recession yet. According to the St. Louis Federal Reserve, economic policy uncertainty and uncertainty around trade policy specifically have risen in recent months to levels not seen since 2019, when the U.S. trade war with China was in full swing. Moody’s Chief Economist Mark Zandi on Thursday compared the current levels of uncertainty to those seen during 9/11 and the 2008 financial crash, having previously said that he felt the country was being “pushed into a recession” by Donald Trump’s tariff policies.
I mean, if we only had one, like the first quarter, we had a decline, and that’s the end of the story, then it’s unlikely we’re gonna suffer a recession. But I think that relates to the fact that the tariffs are up and down and all around and businesses just don’t know where they’re going to land and don’t want to raise prices until they have a fix on where those tariffs are going to ultimately settle. And I do think a lot of bigger businesses are nervous about getting caught up in the political buzzsaw if they raise prices in a public way. So it’s taking a bit longer than I would have thought, a month or two longer, but I think we will see prices continue to rise. The weakening in job growth goes to what feels like an economy-wide hiring freeze. That’s the firewall between recession and no recession, is the low layoffs.
Unemployment
Prior to the Global Financial Crisis of 2008, this ratio was at an all-time low, which forced households to sell assets to pay their debts when the economy cracked. Bhave and his team noted that rising credit card delinquencies and fading excess savings from the pandemic-era are the two main data points that skeptics use to demonstrate consumers are in trouble. The US last experienced a recession in early 2020 during the COVID-19 pandemic, which triggered widespread business closures and job losses. According to the Center on Budget and Policy Priorities (CBPP), that recession was the shortest and most severe since World War II, with a sharp contraction in economic activity. He said that the National Bureau of Economic Research (NBER) is considered the arbiter of when a recession begins and ends, noting one key factor that its academic researchers consider above others.
What role do tariffs and spending cuts play?
There are probably other examples, but none that apply to the U.S. today. Stock market volatility has been fueled by Trump’s growing list of tariffs and their stop-start implementation, which has businesses and analysts questioning the direction of U.S. trade policy and the potential impacts of this. Preliminary results for the University of Michigan’s widely watched Consumer Sentiment Index also revealed a drastic decline in Americans’ economic optimism in March.
“While they look at a plethora of data to make this determination, most importantly, far and away, is payroll employment,” he stated, adding that if employment falls for more than a month consecutively, the economy has entered a downturn. Under such conditions, we anticipate the Fed will lean in the direction of price stability and will not cut rates in May or June save a disruption to financial markets or real cracks in the domestic labor market. Zandi noted in a recent X post that he sees a recession as characterized by a period of consistent declines in job growth that lasts for at least a few months.
“But, unemployment is a lagging indicator and given that the labor force has gone sideways this year as the number of foreign-born workers is declining, unemployment will be a particularly poor barometer of recession,” he added. For the second factor, Zandi pointed out that employment is falling throughout many industries. He said that previously, if half of the 400 industries being surveyed reported declining employment, an economic recession had begun.
US Recession Warning Issued by Economist Who Predicted 2008 Financial Crisis
That’s led to fears that after years of elevated interest rates and stubborn inflation, the labor market may be beginning to crack. Goldman Sachs recently raised its recession probability for the US from 15 per cent to 20 per cent, citing Trump’s tariff wars, government spending cuts, and a slowing housing market. Similarly, Morgan Stanley has predicted “softer growth this year” than initially anticipated, reported AFP. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply and decreasing interest rates or increasing government spending and decreasing taxation. In turn, a contraction in capital expenditures, rising unemployment and falling real wages will curtail spending.
That doesn’t mean the next recession will play out in exactly that fashion, though. Zandi reiterated his view that everything comes down to economic policy, which remains unpredictable. “The actual rate cuts themselves may not have as much of a benefit as one might think, because they’ve already been anticipated and discounted,” he noted.
- That’s the firewall between recession and no recession, is the low layoffs.
- The technical definition of a recession is two consecutive quarters of negative growth in gross domestic product, a comprehensive measure of all goods and services produced in a country.
- These forecasts represented significant downward revisions from the forecasts of three months prior.
Consumer sentiment, current assessments of economic conditions, and consumers’ expectations for the future deteriorated across all political affiliations and for multiple facets of the economy, with the latter dropping over 15 percent from February. Historically, recessions begin and end with payroll employment, with jobs. When employment goes negative in a given month—and that’s the start of a job loss on a consistent basis—that’s start of recession. That’s when the National Bureau of Economic Research (NBER), the group of academics that date business cycles here in the U.S., will date the start of a recession.
She served in the Obama administration and is now the chief economist for New Century Advisors. Employers added more jobs than forecasted in April as unemployment rate stood at 4.2%. Goldman forecasts unemployment will rise to 4.7% by year’s end, but the jobless rate has ranged between 4% and 4.2% since May 2024.
We may even start to see some job loss, and that’ll become clearer towards the end of the year into next. Prices are already rising, you can see it in the data, but it’s going to rise to a degree that it will be impossible for people to ignore. They’ll see it clearly in the things that they’re buying on an everyday basis. “I think what happens with California and New York may decide what happens to the nation,” he said. “I mean, if California and New York weaken and start to contract, the national economy is going to go into recession.” Despite the resilience of the U.S. economy in the post-pandemic years, the chance of a recession hitting the country hasn’t been completely staved off.
Global
These are the policies that were articulated during the presidential campaign. Again, I don’t think the economy is in a recession, at least not at this point, but it feels like it’s on the brink, it’s on the precipice of a recession. However, if they prove able to “hold their own,” Zandi said “the economy is going to be fine and get through without recession.” “I don’t think the economy is in a recession, at least not at this point,” he said, “but it feels like it’s on the brink, it’s on the precipice of this recession.” Trump’s goal is to reduce the federal workforce and eliminate roles that do not fit his agenda, like those in charge of diversity, equity, and inclusion (DEI) initiatives.
They differed sharply on the likelihood of a recession, ranging from dire warnings to skepticism about whether the recent data suggests significant cause for concern. Part of the reason why recessions are tricky to spot is because data is released with a lag. The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products.
The Pritzker Estate: A High-Profile Case Study In Ultra-Luxury Real Estate
The jobs report came days after fresh gross domestic product data indicated average annualized growth of 1.2% over the first half of 2025, well below 2.8% growth last year. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
The excessive debt us recession on the horizon when experts think it could hit part of the pattern does describe the U.S. now, but I don’t think the rest applies to the U.S. A debt crisis is not to be recommended and is not what the tariff proponents have in mind. Diccon Hyatt is an experienced financial and economics reporter who has covered the pandemic-era economy in hundreds of stories over the past two years. He’s written hundreds of stories breaking down complex financial topics in plainspoken language, emphasizing the impact that economic currents would have on individuals’ finances and the market.
Official economic data shows that a substantial number of nations were in recession as of early 2009. The US entered a recession at the end of 2007,156 and 2008 saw many other nations follow suit. The US recession of 2007 ended in June 2009157 as the nation entered the current economic recovery.
- These are the policies that were articulated during the presidential campaign.
- Then, as part of an adjustment program, usually under the guidance of the IMF International Monetary Fund, they have to undergo a combination of reducing the budget deficit, monetary discipline, and devaluation.
- The U.S. economy contracted in the first quarter of 2025 for the first time in three years, triggering concerns about an impending recession.
- There are lots of different motivations, generating revenue—the tariff revenue is quite significant.
- But I think, you know, I am worried that the quality and timeliness of data will be impaired by these cuts.
They’re pretty universally bad — almost all economists are opposed to them. First, a poor country may have no effective way of collecting revenue other than a tariff. Third, the Europeans have something called CBAM, Carbon Border Adjustment Mechanism, in the cause of fighting climate change. One might interpret that as a tariff, but my interpretation is that because it helps carry out the Paris Accord, it may be beneficial and indeed is the sort of measure that is fine under the World Trade Organization.
While we think there is still time for the executive branch to limit the damage from the new tariff regime, it is too late to prevent the economy from slowing to a crawl. After all, a 25% effective tariff rate and the new 10% minimum tax on imported goods are tantamount to a $410 billion per year consumption tax on businesses and households. Polymarket, the cryptocurrency-driven prediction platform, has opened betting lines on the likelihood of a recession. Users are currently assigning it a 38 percent chance, a significant increase from 23 percent last Friday. The CBOE Volatility Index, a widely watched gauge of market risk, has increased by approximately 50 percent in the past month, suggesting that investors and institutions are hedging their portfolios in anticipation of heightened market fluctuations.
“We’re not there yet – and maybe this thing gets turned around. But that’s increasingly becoming hard to do with each passing week.” In a social media post, Trump volleyed sharp criticism and baseless accusations at McEntarfer, claiming without evidence that the data had been “manipulated.” The jobs report featured revisions of previous months’ data, which is a routine practice. The future is impossible to predict, but today’s major recession risks all have to do with high inflation — or rather, what has to happen because of it. Over the last couple of years, Fed officials raised interest rates at the fastest pace in four decades to cool inflation. Although many experts remain concerned about the implications of the yield curve inversion, BofA’s economists said they don’t see it as a major warning sign when looking at the historical data. First, it was COVID lockdowns, then a bout of inflation and a few foreign wars, and more recently, elevated interest rates.
Optimism about the state of the economy, and one’s personal finances, translate into consumer spending, estimated to account for over two-thirds of the nation’s gross domestic product (GDP). While the Trump administration is optimistic about the country’s growth prospects—Commerce Secretary Howard Lutnick going so far as to say Americans should “absolutely not” prepare for a recession—economists are voicing gloomy forecasts. And, you know, depending on how hard those headwinds blow will determine whether we go into recession or not. But they go directly—connect the dots from all this right back to policy. So it’s not that like they’re cutting, they’re not laying off, so it’s not a recession, but it’s the reason why they have paused. And now we’re going to see the real consequences of these policies in the form of higher prices, reduced purchasing power, less labor force.