The U.S. economy is exhibiting several warning signs that suggest a recession may be on the horizon.
From declining GDP to weakening consumer confidence, let’s explore the top indicators that economists and analysts are closely monitoring.
GDP Contraction in Q1 2025
The U.S. economy shrank by 0.3% in the first quarter of 2025, marking the first decline in nearly three years. This contraction is attributed to escalating tariffs and a surge in imports, leading to reduced consumer spending and a record trade deficit.
Rising Recession Probabilities
Financial institutions are increasing their recession forecasts:
Goldman Sachs raised the odds to 45%.
J.P. Morgan estimates a 60% chance of a global recession by year-end.
The IMF increased the U.S. recession risk to 40%.
Consumer Confidence Decline
Consumer confidence has dropped to its lowest level since May 2020, reflecting growing concerns about inflation, employment instability, and economic uncertainty.
The Washington Post
Stock Market Volatility
The S&P 500 experienced significant losses in early April 2025, with a 10% decline over two days, erasing nearly $5 trillion in market value. This volatility is largely attributed to the impact of new tariffs and trade tensions.
Wikipedia
Corporate Investment Slowdown
Business leaders are scaling back investments due to uncertainty over trade policies. Goldman Sachs CEO David Solomon noted that tariffs are forcing CEOs to “tighten their belts,” leading to reduced capital expenditures and hiring.
Labor Market Weakness
Job growth is faltering, with only 62,000 new positions added in April. Major companies like UPS have announced significant layoffs, and job openings have hit a six-month low, indicating a cooling labor market.
Trade Deficit Expansion
A surge in imports ahead of new tariffs has led to a record trade deficit. This imbalance is a drag on GDP and reflects underlying weaknesses in domestic production and consumption.
Retail and Manufacturing Slowdown
Retail sales and manufacturing orders are declining, with businesses reporting reduced consumer demand and supply chain disruptions due to tariffs. This slowdown is affecting sectors across the economy.
Inverted Yield Curve
The yield curve has inverted, a classic recession indicator, signaling that investors expect weaker economic growth in the near term. This inversion reflects concerns about future interest rates and economic stability.
Global Economic Pressures
International markets are also showing signs of stress, with European economies experiencing growth while the U.S. contracts. Global supply chain issues and trade disputes are contributing to economic uncertainty worldwide.
