Summary of Recession Indicators and Chances for a Recession (in USA or global) in 2025
As of March 17, 2025, key economic indicators show a moderate to increased recession risk for the year, estimated between 20% and 45%. The yield curve is partially inverted, Q1 GDP growth is negative, and consumer confidence is declining, presenting increased risk signals. Annual GDP projections and the labor market still suggest some resilience, indicating low to moderate risk. Below is a concise breakdown with data presented in tables for clarity.
1. Executive Summary
This report analyzes the current state of the United States economy through key economic indicators to assess the likelihood of a recession in 2025. The analysis incorporates recent economic data and expert forecasts. While the economy showed resilience in 2024, leading indicators present a mixed picture. The yield curve is currently inverted, Q1 2025 GDP growth is negative, and consumer confidence is declining. However, annual GDP projections suggest potential resilience, and the labor market, while showing some signs of weakening, remains relatively stable. Expert opinions vary, with some forecasting continued growth while others warn of a potential slowdown or recession. The overall probability of a recession in 2025 is estimated to be in the range of 20% to 45%.
2. Understanding Economic Recession
A recession is a significant decline in economic activity, typically lasting more than a few months. The National Bureau of Economic Research (NBER) defines it as a significant and widespread downturn in economic activity, considering factors like employment, production, and sales. Recessions are characterized by declines in employment, output, and demand.
3. Leading Economic Indicators and Their Analysis
3.1. Gross Domestic Product (GDP)
The US economy ended 2024 with a real GDP increase of 2.8 percent for the full year. However, the fourth quarter of 2024 saw a growth rate of 2.3 percent, a deceleration from the third quarter’s 3.1 percent. Notably, the first quarter of 2025 experienced a contraction of 2.4% annualized. Annual GDP growth for 2025 is projected to be between 1.7% and 2.4%.
Table 1: Quarterly and Annual GDP Growth Rates for 2023, 2024, and Q1 2025
| Period | Real GDP Growth Rate (Annualized) |
|---|---|
| Q3 2023 | 3.1% |
| Full Year 2023 | 2.9% |
| Q3 2024 | 3.1% |
| Q4 2024 | 2.3% |
| Full Year 2024 | 2.8% |
| Q1 2025 | -2.4% |
| Full Year 2025 (Projected) | 1.7%–2.4% |
3.2. Unemployment Rate and Labor Market
The unemployment rate stood at 4.0 percent in January 2025 and increased slightly to 4.1% in February 2025. Initial jobless claims contributed to a decline in the LEI in December 2024. The Sahm Recession Indicator was 0.37 in January 2025 and decreased to 0.27 in February 2025. A recession is signaled when this indicator rises by 0.50 percentage points or more. Job growth in January 2025 was concentrated in health care and government.
3.3. Inflation
The PCE price index increased to 2.3 percent in Q4 2024, up from 1.5 percent in Q3. Core PCE inflation rose to 2.5 percent from 2.2 percent. Average inflation expectations for the next 12 months surged to 6% in February 2025.
3.4. Treasury Yield Curve
As of March 17, 2025, the US Treasury yield curve shows an inversion between the 3-month and 10-year yields (4.317% > 4.305%).
Table 2: Current US Treasury Yield Curve Rates (as of March 17, 2025)
| Maturity | Yield (%) |
|---|---|
| 3-Month | 4.317% |
| 2-Year | 4.021% |
| 10-Year | 4.305% |
Note: Select maturities shown for brevity.
3.5. Consumer Confidence
The Conference Board Consumer Confidence Index declined to 104.1 in January 2025 and further to 98.3 in February 2025. The Expectations Index fell below 80 in February 2025, a level historically signaling recession. The University of Michigan Consumer Sentiment Index also decreased to 64.7 in January 2025 and to 57.9 in March 2025.
3.6. Business Confidence
The ISM Manufacturing PMI rose to 50.9 in January 2025 but fell to 50.3 in February 2025. The NFIB Small Business Optimism Index declined to 102.8 in January 2025 and to 100.7 in February 2025. The Conference Board Measure of CEO Confidence™ increased to 60 in Q1 2025, while the Chief Executive’s CEO Confidence Index plummeted in March 2025.
3.7. Housing Market Indicators
Privately-owned housing units authorized by building permits were at an annual rate of 1,483,000 in January 2025, a slight increase from December but a decrease from January 2024. Privately-owned housing starts were at an annual rate of 1,366,000 in January 2025, a decrease from December and slightly below January 2024.
3.8. Retail Sales
Advance estimates of US retail and food services sales for January 2025 were $723.9 billion, a decrease from December but an increase from January 2024.
3.9. Volatility Index (VIX)
As of March 14, 2025, the VIX was around 21.68-21.77.
3.10. Leading Economic Index (LEI)
The Conference Board LEI for the US declined by 0.3% in January 2025 to 101.5. The Conference Board states the LEI is no longer signaling a risk of recession.
4. Recession Probability Estimates
| Source | Probability | Notes |
|---|---|---|
| New York Fed | 23.18% | Based on yield curve (Feb 2025) |
| Kalshi Market | 40% | Market sentiment (Mar 2025) |
| J.P. Morgan | 35%–45% | Model-based (end of 2025) |
| Bankrate Survey (Economists) | 26% | By the end of 2025 (Jan 2025 Survey) |
| S&P Global Ratings | 25% | In the next year (Mar 2025) |
| American Bankers Association | 30% | For 2025 |
| J.P. Morgan (Subjective View) | 20% | Next 12 months (Dec 2024) |
| Goldman Sachs Research | 15%-20% | Next year (Nov 2024/Mar 2025) |
| Vanguard | Below baseline expectation | For 2025 (Dec 2024) |
| Steven Hanke (Johns Hopkins) | Likely | In 2025 (Nov 2024) |
5. Potential Triggers and Risks for Recession in 2025
New Tariffs and Trade Policies: The implementation of new tariffs poses a significant risk.
Shifts in Government Economic Policy: Uncertainty surrounding fiscal, trade, and immigration policies could impact growth.
Global Economic Uncertainties: Ongoing conflicts, geopolitical tensions, and trade restrictions present challenges.
6. The Role of Federal Reserve Policy
Current Monetary Policy Stance: The Federal Reserve maintains a relatively tight monetary policy to combat inflation.
Future Interest Rate Expectations: Expectations point to a few interest rate cuts in 2025.
Stress Test Scenarios: The Federal Reserve conducts stress tests on banks under severe recession scenarios.
7. Conclusion
The US economy in early 2025 presents a complex picture. While some indicators like the labor market show relative strength, others like the inverted yield curve, negative Q1 GDP growth, and declining consumer confidence suggest increased recession risk. Business confidence is mixed, and the housing market is showing signs of cooling.
Economists’ forecasts for a recession in 2025 range from 20% to 45%, reflecting the mixed signals from the indicators. Potential triggers like new tariffs and policy shifts add to the uncertainty.
Decision Points
High Risk Signals: The inverted yield curve and negative Q1 GDP growth suggest a potential downturn. Act cautiously if prioritizing short-term stability.
Mitigating Factors: Positive annual GDP forecasts (1.7%–2.4%), a Manufacturing PMI above 50, and a relatively low unemployment rate (4.1%) indicate possible continued economic activity. Consider holding steady if focused on long-term growth.
Uncertainty: The probability range (20%–45%) reflects mixed signals. Closely monitor Q2 GDP, consumer trends, and policy developments for confirmation.
This data provides a clear snapshot—use it to weigh risks versus opportunities based on your priorities.
*over 200 sources gathered with the help of AI to write this report.