Five Recession Indicators Now Raising Alarm in the US

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.

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.

What Are the Main Recession Indicators Saying?

With input from U.S. economists, Newsweek has identified the five key indicators that experts are monitoring to evaluate the likelihood of an economic downturn.

Consumer Confidence

Economist Gary Hufbauer told Newsweek that measures of consumer confidence are among the most important gauges of the country’s economic wellbeing.

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).

“A change in feelings about the economic backdrop is often a harbinger of things to come and precedes a downshift in consumer spending and business investment,” according to Jeffrey Roach of LPL Financial.

The Conference Board’s latest Consumer Confidence Index, arguably the most commonly consulted measure, saw a 7.2-point drop between February and March. This reading, which came in below expectations, marked the fourth consecutive month of declines and brought the index to its lowest level since January 2021, when the country was still grappling with the COVID pandemic.

The Expectations Index, which weighs consumers’ forecasts for economic conditions in the short-term, tumbled to 65.2, the lowest reading in 12 years and below the 80-point threshold that the Conference Board said “usually signals a recession ahead.”

Preliminary results for the University of Michigan’s widely watched Consumer Sentiment Index also revealed a drastic decline in Americans’ economic optimism in March. 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.

Both measures, according to KPMG’s Chief Economist Diane Swonk, “show a simultaneous softening in labor market conditions and rising fears of inflation.”

“The two do not tend to rise in tandem,” Swonk told Newsweek, “and reinforce concerns of stagflation related to tariffs.”

Others hold less bleak views about the recent consumer confidence readings, with Zandi telling CNN on Thursday that consumer confidence is “not screaming recession yet,” but adding that the indicator is “moving in the wrong direction.”

Credit Card Late Payments and Default Rates

Hufbauer also cited difficulties paying off credit card debts as a warning signal for the economy.

U.S. credit-card debt reached a record $1.2 trillion in the fourth quarter of 2024, now comprising about 6 percent of America’s total $18 trillion of debt, according to the Federal Reserve Bank of New York. Its report shows levels of serious delinquency—defined as late payments of more than 90 days—edged up in the quarter, and are now over double the levels in early 2022.

According to Fitch Ratings, private credit default rates rose to 5.7 percent for the 12 months period ending in February, compared to 5.0 percent in January.

The rise of buy-now-pay-later services such as Klarna, dubbed “the new credit card—without the plastic” by personal finance expert George Kamel, has also been pointed to as a sign of America’s growing debt struggles.

Kamel told Newsweek that the company’s latest partnership with Doordash will allow Americans to “eat their way further into debt, four payments at a time.”

Business Uncertainty

Economists also point to growing business uncertainty and small business uncertainty as a worrying sign for the economy.

The National Federation of Independent Business’ (NFIB) Uncertainty Index climbed 4 points to 104 in February, its second-highest reading since the index began in 1973.

The percentage of respondents who believed it was a good time to expand their business experienced its steepest monthly drop since April 2020. Meanwhile, the net percentage of owners expecting economic improvement declined by 10 points from January to 37%. Labor costs, identified as the most pressing issue for business owners, increased by 3 points to 12%, just 1 point shy of the survey’s record high of 13% set in December 2021.

“Uncertainty is high and rising on Main Street, and for many reasons,” NFIB Chief Economist Bill Dunkelberg said. “Those small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand fell, but remains well above where it was in the fall. Inflation remains a major problem, ranked second behind the top problem, labor quality.”

According to a March report from the Federal Reserve Bank of Atlanta, while year-ahead expectations of sales growth have edged up in recent months, businesses now “remain more uncertain about future sales growth than they were before the pandemic.”

Swonk said that the NFIB data points to “higher prices with less hiring or no hiring.”

“That reflects [the] stagflation nature of tariffs, which both erode profit margins, while some portion is passed onto consumers,” she added.

Trade Policy Uncertainty Index

As well uncertainty regarding future business conditions, trepidation specifically linked to the trade policies of the new administration has risen significantly in 2025.

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.

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.

“The Trade Policy Uncertainty index has soared to a record high and makes previous spikes – during pandemic and the trade war with China look like blips on a radar screen,” Swonk said.

She warned that, while Trump’s first-term dispute with China hit both investments and consumer spending, the new tariffs “cover a much larger swath of goods, countries and often are stacked.”

“Two 10 percent tariff hikes on China add to the 10.8 percent already in place, then add another 25 percent for their Venezuelan oil at 25 percent, that raises the tariff to 55.8 percent,” she explained. “Then there are specific sector tariffs such as steel, which are an additional 25 percent on that. The range and scope of tariffs easily gets us to levels not seen prior to the 1930s, it could be as high as 1906.”

Inflation Expectations

While inflation has shown signs of easing towards the Fed’s 2 percent target, confidence that this trend will continue remains low.

According to the University of Michigan, year-ahead inflation expectations rose from 4.3 percent in February to 4.9 percent in March. This marks the highest reading since November 2022 and the third consecutive month of “unusually large increases” of 0.5 percentage points or more.

The Conference Board’s most recent report also found that average 12-month inflation expectations had risen from 5.8 percent to 6.2 percent between February and March, which senior economist Stephanie Guichard said reflected consumers’ persistent concerns “about high prices for key household staples like eggs and the impact of tariffs.”

According to a recent 1,000-person survey by life insurance and asset management firm Allianz Life, 71 percent of Americans believe inflation will worsen over the next 12 months, an increase from 60 percent in the fourth quarter of 2024.

When Will We Know If There Is a Recession?

“A recession by definition is when we see two quarters of contraction accompanied by a drop in employment,” Swonk told Newsweek.

Beyond the warning signs on the horizon, establishing that the country is in the grips of a recession will require U.S. GDP to fall. According to the latest reading released by the Bureau of Economic Analysis, the U.S. economy expanded 2.4 percent in the fourth quarter of 2024, slightly ahead of forecasts, but below the growth seen in the third quarter. Unemployment, meanwhile, rose slightly in February.

With cuts to the federal government—the country’s largest employer—showing no signs of abating, and an ever-expanding list of countries and goods covered by the administration’s tariffs, economists will be watching closely to see if either could tip the balance towards a recession.