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Concerns are growing as President Trump recently refrained from dismissing the possibility of a recession occurring in the United States within the year. During an interview with Fox News, he expressed hesitance in making predictions about the economy, stating, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
Similarly, U.S. Commerce Secretary Howard Lutnick indicated during an interview with CBS News that despite the potential for a recession, he believes Mr. Trump’s economic strategies are “worth it,” even if they lead to economic downturn.
Predicting recessions is notoriously challenging, but certain criteria must be met for a business cycle to officially be deemed recessionary. Here’s what to understand about the situation.
Understanding Recession: Definition and Determination
A recession is typically characterized as a notable and persistent decline in economic activity across the economy. A common definition is two consecutive quarters of negative growth; however, the reality is more complex.
The National Bureau of Economic Research (NBER), an independent and nonpartisan organization, is responsible for determining the onset of recessions in the U.S. To assess whether the economy has entered a recession, NBER analyzes six key indicators: real personal income, non-farm payroll employment, employment trends reflected in household surveys, personal consumption levels, manufacturing and trade sales, and industrial production.
When evaluating these indicators, NBER considers the depth, breadth, and duration of economic downturns. For an economic decline to qualify as a recession, it must be substantial, widespread across various sectors, and sufficiently prolonged.
Is a Recession Imminent for the U.S.?
Current economic indicators suggest that an imminent recession is unlikely. While there has been an increase in layoffs nationwide, the U.S. labor market continues generating jobs, albeit at a slower pace. Julia Pollack, chief economist at ZipRecruiter, pointed out that four out of the six indicators monitored by NBER suggest ongoing economic expansion.
“While the atmosphere may feel uneasy due to heightened policy uncertainty and federal layoffs, the economy hasn’t officially entered a recession,” stated Ryan Sweet, chief U.S. economist at Oxford Economics, in an interview with CBS MoneyWatch. “However, it does feel challenging for many.”
Despite this, emerging signs indicate potential vulnerabilities that could lead to a sharper economic decline. Retail spending—a critical driver of the economy—has shown signs of declining, and recent measurements of consumer confidence have indicated a significant drop. Concerns are mounting around the impact of the current administration’s tariff policies, which have negatively affected stock prices and could dampen consumer spending further.
“The reduction in consumer spending is alarming, as it is the lifeblood of the U.S. economy,” Pollack emphasized. “It’s not just that spending is decreasing; consumer confidence is waning, household budgets are tight, and consumers are exposed to economic shocks, all of which amplify fears of a recession.”
Sweet added, “Currently, the usual predictors of recession aren’t flashing alarming signs, but there is a pervasive cloud of uncertainty surrounding trade, fiscal policies, and immigration.” Meanwhile, Lutnick defended Trump’s economic policies, asserting that they are designed to stimulate economic activity.
“The only reason there could possibly be a recession is due to the ineffective policies we experienced previously. Our current policies generate revenue, stimulate growth, and promote domestic manufacturing,” he remarked during his CBS interview.
Indicators of a Recession
One of the most visible indicators of an impending recession is a consistent increase in job losses alongside rising unemployment rates. During recessionary periods, consumers tend to reduce spending, and businesses typically cut back on investments, which leads to slowed hiring and potentially increased layoffs.
The unemployment rate recently rose to 4.1%, up from 4%, though this rate remains relatively low. Employers added 151,000 jobs last month, indicating that companies are still in need of workers, which helps to keep unemployment levels manageable.
Economists closely monitor weekly unemployment benefit claims as this metric provides insight into whether layoffs are escalating. Currently, the data shows that weekly jobless claims remain low.
Who Faces the Greatest Risk in a Recession?
The repercussions of a recession would ripple through various segments of the population, resulting in reduced hiring and lower wage increases. Early career workers are often hit the hardest during recessionary periods, as they tend to be the first laid off, as noted by Alex Jacquez, chief of policy and advocacy at the Groundwork Collective, a left-leaning economic think tank.
“Individuals who faced significant barriers to employment during prosperous times often find themselves first on the chopping block during downturns,” Jacquez explained. This disproportionately affects low-wage earners and marginalized communities, such as black and Latino workers.
Moreover, those with substantial mortgage debt and inability to cover their minimum payments may face foreclosure, limiting their opportunity to accumulate household wealth. “This is why recessions can be particularly damaging; it is often the most vulnerable members of society who suffer the most,” Jacquez expressed.
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