Is the US Already in a Recession?

Over the past several months, politicians, commentators, and respected economists have increasingly argued that the United States is already in recession. Former White House Communications Director Anthony Scaramucci declared that, after nearly four decades on Wall Street, he believed the economy was already contracting. Moody’s Analytics Chief Economist Mark Zandi similarly argued that while the National Bureau of Economic Research (NBER) might not recognize it immediately, a recession has effectively begun. Others, including Senate Democratic Leader Chuck Schumer and several senior Democratic lawmakers, have stopped short of declaring a recession outright but have described an economy “teetering on the edge,” pointing to slowing employment growth, elevated prices, and growing economic uncertainty. There have been others.

So who’s right? The most honest answer is that nobody knows: not because economists are confused, but because recessions are extraordinarily difficult to identify in real time. Unlike hurricanes or earthquakes, recessions have no clear beginning that everyone recognizes immediately. They are diagnosed only after a substantial body of evidence has accumulated, and by then they are often months old.

Contrary to popular belief, a recession is not defined, officially or otherwise, as two consecutive quarters of negative GDP growth (GDP contraction). That shorthand occasionally aligns with reality, but it has never been the official standard.

In the United States, recessions are determined by the National Bureau of Economic Research’s Business Cycle Dating Committee, which defines a recession as a significant decline in economic activity spread broadly across the economy and lasting more than a few months. In making that determination, the committee examines dozens of indicators, including but not limited to employment, industrial production, personal income, real consumer spending, GDP, and Gross Domestic Income (GDI). Importantly, the committee almost always reaches its conclusions months after the fact. (RELATED: Good News, Bad Reactions: The Logic of Financial Markets)

That reality alone explains not only why intelligent observers can disagree today, but why predicting (or hinting at) one can be a blunt political tool.

So what does the current evidence suggest? At present, the broad body of coincident economic data still argues against a recession in the offing. Real GDP continues to expand, albeit more slowly than in recent years. Gross Domestic Income — a useful companion measure that often captures economic activity somewhat differently — also continues to show growth. Employment has unquestionably cooled, payroll gains have slowed, and hiring has become less robust than during the post-pandemic recovery, but the labor market has not exhibited the sharp deterioration typically associated with the start of an economic downturn. Consumers have become more cautious, yet they continue to spend. Industrial production has produced mixed signals rather than a broad-based collapse, while personal incomes continue to increase in real terms. None of these indicators, individually or collectively, resembles the widespread contraction that has characterized previous economic contractions.

Yet even though these predictions are generally coming from a particular ideological angle, it does not mean recession concerns are irrational. Leading indicators have weakened over the past year. Payroll growth has slowed materially. Manufacturing activity, while growing lately, softened for most of last year. Housing remains under pressure from elevated mortgage rates and affordability challenges. Business surveys point to heightened uncertainty, while firms appear increasingly reluctant to hire aggressively. Financial markets have also spent much of the past few years pricing elevated recession risks, reflected in yield curve inversions and shifting expectations for Federal Reserve policy — both of which only recently reversed. These are not frivolous observations. They are legitimate warning signs that deserve careful attention. (RELATED: Under the Radar of the ‘Doomcasting’ Media, There Is Massive Industrial Investment Occurring in the U.S.)

The distinction is that leading indicators are designed to anticipate turning points, not confirm them. By definition, they can produce false positives as well as correct warnings.

This highlights an important framework routinely employed. Leading indicators attempt to forecast where the economy is headed. Coincident indicators tell us where economic activity stands today. And lagging indicators help confirm what has already occurred. At present, the leading indicators are essentially neutral. The coincident indicators remain mixed but generally positive. The lagging indicators have yet to confirm a broad-based contraction. That combination, as of April, is consistent with an economy that is slowing, yet not by any means one that has already entered recession.

Could today’s economy eventually be recognized as the beginning of a recession? It’s possible. Economic turning points are often visible only in hindsight. The NBER has repeatedly identified recessions months after they began because sufficient evidence simply did not exist in real time. That possibility can never be ruled out.

But acknowledging that uncertainty is vastly different from asserting that the economy is already in recession. Such a claim carries an evidentiary burden. It requires demonstrating not merely weaker hiring, nervous consumers, or soft manufacturing data, but a broad, sustained decline in economic activity across multiple sectors of the economy. That burden has not yet been met.

The most reasonable conclusion, therefore, is to dismiss politically-inspired prognostication in favor of neither complacency nor alarmism. The economy is undoubtedly slowing on some fronts, and several leading indicators warrant close monitoring. Yet slowing growth is not synonymous with recession. The preponderance of current evidence continues to point toward a slowing expansion rather than a broad-based contraction. As always in the economic sciences, today’s assessment remains provisional and subject to revision as new data emerge. Intellectual honesty requires little more, but nothing less.

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