Recessions are always officially declared after they have already started.
Nicole Narea covered politics at Vox. She first joined Vox in 2019, and her work has also appeared in Politico, Washington Monthly, and the New Republic.
In the US, the National Bureau of Economic Research (NBER) is the official arbiter of what constitutes a recession, taking into consideration different economic indicators, including growth. The organization defines a recession as a “significant decline in economic activity that is spread across the economy,” usually lasting more than a few months, but not always.
The Great Recession technically began in December 2007 following the global financial crash, but the NBER didn’t recognize it as such until the following December. The Covid-19 recession lasted less than three months, starting in February 2020, but it wasn’t declared until June.
So is it possible that the US is already experiencing a recession brought on by President Donald Trump’s tariffs — but we just don’t know it yet?
Economists say it’s possible, and they’re looking for signs that go beyond sustained negative economic growth, which can only be seen in hindsight.
That’s important for Americans making everyday financial decisions, as well as businesses planning for a potentially rocky quarter ahead with the implementation of Trump’s tariffs.
“Whether two or three months from now, we’re looking back and saying, ‘Was the US in a recession or not?’ will be a really important question,” said Michael Madowitz, principal economist at the Roosevelt Institute, a progressive economic think tank. “But also, it’s completely reasonable to be like, ‘I don’t need to wait for those answers to understand if my local economy is getting worse.’”
Here are three indicators economists are watching.
1. Consumer confidence is declining
If the US is experiencing a recession, it would be different from recessions of the recent past. This time, Madowitz said, it would be a direct result of Trump’s tariffs driving down consumer demand. Usually, external factors first affect businesses and then trickle down to consumers. (Though the Covid-19 recession was also exceptional in this respect.)
“Usually, we think of things as going from the corporate side down and hitting the consumer,” Madowitz said. “In this case, it’s almost the opposite. It’s 100 percent from the consumer side, because we are hammering the consumer side.”
As consumers anticipate higher prices due to tariffs, a monthly survey by the University of Michigan showed consumer sentiment dropped 11 percent in April to 50.8 — lower than it was during the Great Recession or during the Covid-19 pandemic.
“You’re seeing retail sales start to really weaken, and that’ll get worse as the tariffs kick in,” said Harry Holzer, a labor economist at Georgetown University and a fellow at the Brookings Institution.
From there, Holzer said he expects cascading effects: Businesses could respond to lower consumer demand and higher costs with payroll layoffs. That could drive up unemployment and leave Americans with even less money to spend.
2. The bond market is flashing a warning sign
Before Trump pulled back on some of his tariffs last week, US Treasury yields were spiking. That was a red flag that investors were losing confidence in the strength of the American economy and the US dollar.
“Usually when the markets are expecting a recession, long-term [Treasury] interest rates drop, but they shot way up last week because now it’s starting to affect confidence in the dollar,” Holzer said.
Treasury yields have continued to be volatile in the days since and aren’t likely to recover entirely in the near term, even if Trump pulls back further on tariffs. That’s because the American economy now appears to be subject to the whims of a man who has what The Economist called an “utterly deluded” understanding of economics and history.
As a result, investors are questioning whether it’s worth taking the risk of sinking more money into the US market. That uncertainty isn’t going away any time soon.
3. Gas prices are coming down — and probably not for a good reason
While many Americans want gas prices to come down, the fact that they are heading to below $3 a gallon may not actually be a good sign. Rather, it could be an indicator that the “global economy is going south fast,” Madowitz said.
The average gas price in the US is about $3.02 a gallon as of Monday, the lowest in years. The White House has argued that Trump is bringing much-needed economic relief to American families as a result.
But it’s worth probing why gas prices are falling so fast. It’s not because of Trump’s energy policies; historically, these kinds of drops have been associated with lower economic activity, if not an outright recession.
“This is not Covid, when oil prices were going down because people weren’t commuting,” Madowitz said. “This is oil prices going down because people are like, ‘This looks really bad for growth everywhere.’”
