That’s the title of an article by Jasmine Cui for NBC, citing me, Jeffrey Frankel (formerly on the NBER BCDC), and Dennis Hoffman (ASU).
Trade tensions have torn into the markets. With stocks sliding into correction territory in the last week, a question emerges: Is a recession next?
Traders on prediction markets — where people wager on such events as the likelihood of a recession — are increasingly betting on an economic downturn. Polymarket, for example, currently places the odds on a recession in 2025 at 40% — a sharp jump of nearly 20 percentage points in under a month.
…
Consumer behavior
Consumer spending represents approximately 70% of the country’s gross domestic product. Jeffrey Frankel, an economist at the Harvard Kennedy School and one of the experts who called recessions for the National Bureau of Economic Research, emphasized that consumer spending is one of the earliest and most direct indicators of economic downturn.
“Retail sales is like if you’re navigating through a foggy ocean, trying to see where the port is — the first rocks, the promise of the mainland as it comes into view — that’s retail sales,” Frankel said.
So far, data from the Census Bureau shows sales numbers have remained steady.
The article contains a graph of the U.Michigan consumer confidence index, up through January. I update with February data, and preliminary March data.
Figure 1: University of Michigan Survey of Consumers Economic Sentiment index. NBER defined peak-to-trough recession dates shaded gray. Source: U.Michigan via FRED, TradingEconomics.com, NBER.
As noted in this post, sentiment indicators are suggesting a recession in March (i.e., this month), while we don’t know what the Sahm rule indicator is going to be reported as (as the article notes, it’s far below the 0.5 ppts threshold as of February, and unemployment would have to jump 0.8 ppts in March to trigger a recession call.
