EconomyMar 1, 2025
The US Is Now On Recession Watch After Disappointing Row of Economic Data Reports — Here’s What To Know
Fiscal Warning
Noah Weidner
Discover
Are we in a recession? It depends on who you ask, but by the letter of the law, the answer is a resounding no. That might be news to many Americans, who have appraised the material circumstances of their lives — higher inflation, slow-to-compensate wage growth, and the end of pandemic-era stimulus — as obvious indicators for a recession. It’s been called the “vibescession.” But unfortunately, the vibes are not getting better. In fact, they seem to be getting worse… marking a big step towards a legitimate technical downturn.
Vibe shift: Since the US was last in a technical recession in 2020, US GDP has performed among the best in the world — and other economic indicators have continued to show growth and strength in the face of economic adversity. But to start 2025, it’s not just the vibes that are off — things are awry. A collection of bad economic data readouts saw the Atlanta Fed’s GDPNow estimate fall off a cliff. Whereas it was projecting a real GDP rise of 2.3% in the current quarter, it now forecasts -1.5%, a significant reversal and a worrying sign.
Some of the data has been choked up to a frigid January, but newfound pessimism among Americans is closely linked to worries about reigniting inflation, tariffs set to go into effect this week, and job cuts in the federal government. Even in industry, business leaders are sounding a frigid tone. Combined, the vibe is affecting the economic picture for the US going forward.
Nobody’s perfect: There were some bright spots, such as a 0.9% month-over-month increase in personal income. But strong GDP growth in the fourth quarter can no longer be generalized going forward, particularly as the US prepares for a trade war. Companies were seen preparing as an increase in durable goods orders came in January, just before the planned tariffs were originally planned to go into effect. Ultimately, we’ll have to see whether these data points continue to be disappointing as a byproduct of changing economic attitudes.
And nobody asked, but… Analysts, who famously forecast a near-certainty of recession in 2022 and 2023, are currently asleep at the wheel. Per Bloomberg, the probability of a recession in the US has only modestly ticked up this week, just over 20%. However, analysts could be something of a lagging indicator (just see how quickly they changed tune in 2020. In other words, by the time analysts say something is happening, we’re already feeling it. As a result, we’ll be eying their views and perspectives closely (mostly for signs of the obvious).
