Are We in a Recession?
According to a traditional definition, the U.S. is not currently in a recession — but fears are rising.
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Updated on April 11
Chances of a recession in 2025 are rising
President Donald Trump’s recent tariff actions are escalating a global trade war that officials say is largely responsible for recent recession projections. At an event on April 4, Federal Reserve Chair Jerome Powell said that while recession risks are increasing, there’s no clarity yet. “I realize that the uncertainty is high, and what we've learned is that the tariffs are higher than anticipated, higher than almost all forecasters predicted. We still don't know where that comes to rest though, and we're just going to have to see that through,” he said.”
Economists at major banks are also beginning to project an economic downturn ahead. On April 4, JP Morgan Chase placed its expectations of a recession in 2025 at 60%. On April 7, Goldman Sachs raised its odds of a U.S. recession from 35% to 45% — a 10 percentage point increase in the span of one week. On Friday, BlackRock CEO Larry Fink told CNBC, ““I think we’re very close, if not in, a recession now.”
There’s no recession right now, but some economic indicators are raising red flags that signal trouble could be ahead:
GDP forecasts are negative. A forecasting tool published by the Atlanta Federal Reserve shows negative growth for the first quarter of 2025; it expects gross domestic product (GDP) to contract by rate of -2.8%, according to data released on March 3. If the forecast is correct, it would be the first quarter where GDP declined since the first and second quarters of 2022.
Consumer sentiment has declined. Recent consumer sentiment indicators say that consumer concerns are largely tied to recent economic policies by the Trump administration, including tariffs. The Conference Board Survey’s Expectations Index — measuring consumers’ short-term outlook for income, business, and labor market conditions — fell to 65.2 in March, which is well below the threshold (80) that projects a possible recession ahead. Then the University of Michigan’s Index of Consumer Sentiment registered its first reading for April at 50.8 — a mere 0.8 percentage points above the historical low of 50 in June 2022.
Consumer spending behavior is fluctuating. The latest data shows that consumers aren’t spending like they once were. Spending declined 0.2% from December to January — the first time in nearly two years when spending decreased from one month to the next, according to the personal consumption expenditures (PCE) data from the Bureau of Economic Analysis released on Feb. 28. However consumer spending bounced back from January to February, increasing 0.4%.
On March 10, former Treasury Secretary Larry Summers posted on X that there was close to a 50-50 chance of a recession in 2025. He wrote, “I would have said a couple months ago a recession was really unlikely this year. Now, it’s probably not 50/50 but getting close to 50/50. There is one central reason. Economic policies that are completely counterproductive.”
Meanwhile, Moody’s Analytics Chief Economist Mark Zandi says he thinks the risk of a recession in 2025 has doubled from earlier this year. On March 30, Zandi posted on the social platform X “I’m raising my odds that a recession will begin sometime this year to 40%, up from 15% at the start of the year.” He says he believes “things are sure to get worse.”
Zandi pointed to a number of reasons for his updated projection including:
Concerning economic data: Declining consumer confidence, elevated inflation and slowing consumer spending.
Trump’s tariff actions, which have sparked a trade war.
The mass federal job cuts made by the so-called Department of Government Efficiency, or DOGE.
Zandi said that recession is less likely than not because layoffs are low, while both jobs and income continue to grow. However, he added this caveat, “...as long as the tariffs and DOGE cuts continue to mount, so too will the odds of recession.”
» MORE:
Trump won’t rule out recession
Trump stoked recession fears following a Fox News interview that aired on March 9 when he didn’t deny the possibility of a recession. He told Fox News, “I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. And there are always periods of, it takes a little time. It takes a little time, but I think it should be great for us.”
Trump’s presidency has been marked by volatility in the markets, largely due to his will-he-won’t-he tariff policies. The S&P 500 reached all-time highs following Trump’s re-entry to the White House but has since dropped; the index is now down 2.6% since Inauguration Day.
During a press briefing on March 11, Press Secretary Karoline Leavitt was asked directly if the White House can assure Americans that there won’t be a recession to which she responded, “We are in a period of economic transition.”
Though the economy occasionally sputtered in the wake of the pandemic, it has certainly been resilient — and now, in 2025, the U.S. is not currently in a recession, according to a traditional definition.
In fact, the current state of the U.S. economy is quite strong, according to most measures.
Even with tumultuous events, such as the 2023 failure of three U.S. banks, the nation has not tipped into recession — and certainly not a depression, either. A depression is an extended economic breakdown, and we have not seen signs of that kind of pain. (See recession vs. depression.)
The definition of a recession
The conventional benchmark has been that two consecutive quarters of a generally slowing economy defines a recession.
That definition was achieved in the first six months of 2022 as part of a shallow economic decline. In the first quarter, the economy shrank 1.6%, then improved, though still fell 0.6% in the second quarter due to lower inventory spending, housing investments and federal and state government spending.
However, the Bureau of Economic Analysis, an agency embedded in the U.S. Department of Commerce, estimates that in the first quarter of 2024, the economy grew at an annual rate of 1.3%.
What has the Fed done?
The Federal Reserve plays a big role in trying to stabilize the economy, in part by adjusting the interest rates paid by both businesses and consumers. The Fed may increase the federal funds rate to try to cool inflation and lower rates to make borrowing cheaper and stimulate the economy. It's a tricky balance, and the Fed has made some significant moves in the last few years:
2022: In an attempt to combat rising inflation, the Fed rate increased seven times — from a range of 0.25% - 0.50% in March to 4.25% - 4.50% in December. 2023: The Fed increased rates four times and left them unchanged four times, ending the year at a 5.25% - 5.50% target range. 2024: The Fed continued to pause the hikes throughout the year before beginning to make cuts in September in response to cooling inflation. 2025: The Fed paused rates at its January meeting. The current target range is 4.25% - 4.50%.
Learn more about recessions
Find out how recessions can impact your money and how to manage your risk.
How long do recessions last?
Historically, recessions have lasted anywhere from two months to several years, according to the National Bureau of Economic Research. But our current economic climate presents unique circumstances that make it difficult to draw a direct comparison with past events.
Unemployment is still low, but we hear more talk of layoffs and business expense cutting each week. The wars in the Middle East and Ukraine are another concern.
Economic cycles are impossible to predict, so it's best to be financially prepared.
Getting ready for a recession
There are a few ways to deal with current economic challenges and prepare for future ones. Starting or beefing up an emergency fund can help you face financial setbacks without going into debt.
Now may also be the appropriate time to look closely at your expenses, adjust your spending and explore resources to get help paying bills.