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Signs of a US recession
While it appears unlikely that US GDP will contract in the first quarter, the economy could enter recession territory in the second or third quarter of 2025.
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Dim outlook: United States President Donald Trump delivers remarks on the jobs report on March 7 from the Oval Office at the White House in Washington, DC. (AFP/Getty Images/Anna Moneymaker)
T
he United States stock market’s downward trend appears to be continuing, with the Dow Jones Industrial Average and the S&P 500 down 4 percent and 6 percent, respectively, this year. And this is just one of many signals that should prompt any sensible business leader, investor or policymaker to start preparing for a US economic slowdown, or even a recession.
The first sign that a US economic slowdown may be imminent is worsening consumer sentiment. The University of Michigan’s index of consumer sentiment fell from 71.7 in January to 64.7 last month, its lowest level since November 2023.
Similarly, The Conference Board’s Consumer Confidence Index declined by seven points in February, to 98.3. More ominous, its Expectations Index, which reflects consumers’ short-term outlook for income, business and labor-market conditions, dropped 9.3 points to 72.9. Anything below 80 usually signals a recession ahead.
The second worrying sign for the US economy is a deteriorating manufacturing outlook. The ISM Manufacturing Index fell from 50.9 in January to 50.3 last month, below market expectations of 50.5. A key reason for the decline was a drop in the number of new orders, which partly reflects uncertainty over US tariffs, after three months of expansion.
Payroll figures, which are arguably among the most-watched market indicators (along with interest rates), are similarly bleak. Total nonfarm payroll employment rose by 151,000 in February, which not only fell short of expectations (159,000) but also came in significantly below the monthly average over the previous 12 months (168,000).
At this rate, job creation may prove inadequate to support strong US growth in 2025, which the International Monetary Fund currently expects to reach 2.7 percent.
A fourth sign that the US is headed toward a slump is that average weekly hours worked fell to a five-year low of 34.1 hours in January, and remained unchanged in February. This is consistent with a longer-term trend: Weekly hours worked have been declining steadily since April 2021, when they reached a post-pandemic peak of 35 hours.
