As President Donald Trump’s trade war ate into consumer confidence last month and ruffles financial markets, talk of a recession has re-entered Americans’ lexicons—but though the odds of an economic slowdown are higher, the evidence does not suggest a recession is imminent.
President Donald Trump speaks before signing executive orders in the Oval Office on Thursday.
Perhaps the most significant data point signaling a possible recession is the Federal Reserve Bank of Atlanta’s widely tracked GDPNow model, which forecasts U.S. economic output will contract by an annualized rate of -2.4% in 2025’s first quarter based on a series of economic data points.
That would be the worst economic growth since the second quarter of 2020, at the height of the COVID-19 pandemic, and set the stage for the widely accepted technical definition of a recession, two consecutive quarters of negative gross domestic product growth.
The National Bureau of Economic Research more broadly defines it as a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”
Several other concerning signals have flashed regarding the health of the American economy, as consumer sentiment tumbled to a 15-month low, layoff announcements shot up to a 4.5-year high and the stock market tanked, with the benchmark S&P 500 index falling 6% from its all-time high set Feb. 19 as the implementation of tariffs rocked Wall Street.
Models tracking the probability of a U.S. recession have simultaneously shifted to indicate a higher probability of an economic pullback.
Goldman Sachs economists upped their odds of a recession over the next 12 months from 15% to 20% on Friday, naming Trump’s economic policies as the “key risk,” while Yardeni Research raised their recession odds Wednesday from 20% to 35%, citing “Trump 2.0’s head-spinning barrage of executives orders, firings, and tariffs.”
The top-ranking economic official in Trump’s administration, Treasury Secretary Scott Bessent, indicated the economy could take a hit Friday, telling CNBC: “Could we be seeing that this economy that we inherited [is] starting to roll a bit? Sure…. We’ve become addicted to this government spending, and there’s going to be a detox period.”
0.8 percentage points. That’s the peak negative hit to GDP from tariffs priced into Goldman’s baseline economic model, the bank’s economists led by Manuel Abecasis wrote Friday. Goldman lowered its end-of-2025 GDP growth rate from 2.2% to 1.7% and its end-of-2026 GDP growth rate from 2.2% to 2% to account for tariffs.
Rising recession odds and the prospects of sharply negative economic growth sound like the sky is falling, but there’s ample evidence to suggest the U.S. is not necessarily on the doorstep of a downturn. As recently as the summer of 2023, Goldman’s recession model signaled a more than 30% chance of a recession, just before the U.S. ripped off seven consecutive quarters of more than 1.5% GDP growth and the stock market surged, even as monetary policy remained restrictive. There’s also evidence the GDPNow model may be skewed negatively, as Goldman attributes much of the Atlanta Fed’s model downward shift to its accounting of gold imports amid the safe haven surge, and the New York Fed’s rival first-quarter GDP projection calls for robust 2.9% growth.
U.S. policies “appear to be tilting towards a less business-friendly stance,” JPMorgan Chase economists Bruce Kasman and Joseph Lupton remarked in a Friday note. “The trade war heated up more than we had expected, and is concentrated in North America, where it will likely generate large spillovers to US growth,” they explained.
There have been 11 recessions over the last 75 years, according to the National Bureau of Economic Research. The last two recessions, the late 2000s’ Great Recession, and the 2020 Covid recession, were the longest and shortest drawdowns of that span, respectively. Bessent leads a growing chorus of Trump allies attributing any weak economic data to the Biden administration, though data points to an overall strong economy during President Joe Biden’s term, as it was during Trump’s first term prior to the global economic slowdown initiated by the pandemic.
The February jobs report released Friday revealed a still healthy labor market, albeit with slower growth. Last month’s 4.1% unemployment rate is well within the historic norm during stable economic periods, though the 151,000 jobs added marked the worst February growth since 2019, as hiring over 2025’s first two months slowed 19% compared to 2024’s comparable period.