Are We in a Recession? 2025 Observations and Predictions
Are we in a recession?
The answer, for now, seems to be that while the economy is slowing down, we aren’t in a recession yet.
A recession has traditionally been defined as two consecutive quarters of negative growth in the gross domestic product. Many people use the term to refer to a period of increased unemployment, reduced manufacturing and services, and an unstable stock market.
The National Bureau of Economic Research (NBER) now defines a recession as involving “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
Understanding current economic conditions is vital to making smart financial decisions. Keep reading as we dig into the current state of the U.S. economy, what experts predict, and how that information can affect you.
Table of Contents
Current economic indicators
Here’s a look at how the U.S. economy is faring, as of the end of April 2025.
Gross Domestic Product
Known as the GDP, the gross domestic product represents the value of all goods and services produced in the United States. In the first quarter of 2025, the GDP dropped by 0.3%. That’s the first decline since 2022.
Unemployment rate
The Bureau of Labor Statistics reports that the monthly unemployment rate has been relatively steady for the past year. It was 3.9% in March 2024 and has slowly increased to 4.2% in March 2025.
Inflation rate
In March 2025, the annual inflation rate was 2.4%. That’s down significantly from 2022, when the average annual inflation rate was 8%. The inflation rate is determined by the Consumer Price Index, which tracks the average change in prices for a basket of goods and services in urban areas.
Consumer confidence
The Consumer Confidence Index from The Conference Board dropped in April 2025 to its lowest level since the COVID-19 pandemic. The nonprofit says consumer expectations for the future are at a 13-year low, with about a third of those surveyed for the index expecting worse business conditions and fewer jobs in the next six months.
Meanwhile, consumer sentiment has dropped more than 32% from March 2024 to March 2025, according to the monthly Survey of Consumers by the University of Michigan. Consumer expectations have seen the largest three-month decline since the 1990 recession.
2025 recession: Expert predictions and analysis
As you can see above, current economic indicators are a mixed bag, so it should be no surprise that experts have varying opinions on if and when the United States may enter a recession. Here’s what various firms and forecasters have to say:
- Fidelity: The investment firm’s Asset Allocation Research Team says “the near-term risk of recession remains low.” It cites increasing corporate earnings and strong consumer spending as bright spots but also notes that recent U.S. policies cloud its outlook.
- J.P. Morgan: Researchers for this national bank and investment firm say there is a 60% probability of a recession in 2025. They previously stated the probability at 40% but increased it, noting: “Aggressive tariff policy could push the U.S.—and possibly the global economy—into recession this year.”
- Moody’s: Data analysis firm Moody’s is more optimistic than J.P. Morgan and puts the probability of a recession at only 35%. Still, the company’s chief economist told ABC News that the number was “uncomfortably high.”
- Goldman Sachs: Financial firm Goldman Sachs says its data puts the probability of a 2025 recession at 45%. It cites uncertainty around U.S. tariff policy as heightening the risk of an economic slowdown.
- Apollo Global Management: The most dire recession prediction comes from this asset management firm’s chief economist. Torsten Sløk says there is a 90% chance of a recession this year. In making his prediction, he says, “tariffs have been implemented in a way that has not been effective.”
- Bank of America: At the other end of the spectrum, Bank of America’s CEO says his bank does not predict a recession this year, according to reporting by Forbes.
Among those predicting a recession this year, a common thread is recent U.S. policies. Many economists point specifically to tariffs as having the potential to damage the country’s economy. On the other hand, a falling inflation rate and steady unemployment rate are positive indicators that give hope that a downturn can be avoided.
Our clients are reacting to recession headlines in different ways, often influenced by their political views and proximity to retirement. Those closer to retirement tend to shift more conservative, while younger investors are encouraged to stay the course—and even buy dips—based on their long-term goals and risk tolerance.
I’ve seen more clients hoard cash, hoping for a market dip, though April’s quick recovery reminded us how hard timing the market can be. No career changes have come up, but some government employees are holding off on big decisions due to ongoing economic uncertainty.
Impact of recent policies on recession probability
In April, the U.S. unveiled new tariffs on most of the country’s global trading partners. Tariffs are a tax added to goods that are imported into a country. Dubbed “Liberation Day” tariffs by President Donald Trump, the White House says they are needed “to ensure fair trade, protect American workers, and reduce the trade deficit.”
However, economists say the tariffs, which are as high as 145% on some goods from China, have caused economic uncertainty and are boosting the chances of a recession. Tariffs may cause market volatility, raise prices, and lower consumer spending, all of which could also lead to an economic slowdown.
Trump has suggested that the Federal Reserve could lower interest rates to offset the impact of tariffs, but the board declined to do so at its March and May 2025 meetings. In speaking to the Economic Club of Chicago, Federal Reserve Chair Jerome Powell said that decision was “based on our best thinking, based on our best analysis.”
How does a recession affect me?
Should the country dip into a recession, how will that affect you? We could feel an economic slowdown in the following ways.
If you’re worried about a potential recession, pay close attention to your time horizon. If you’ll need money from an account within two years, take risk off the table. Earning around 4% in a money market account is a smart, low-risk move.
For longer-term investors, stay the course. Volatility may be short-lived, especially if trade agreements are reached. There’s always risk on both sides, but sitting in cash too long can lead to missed opportunities. Even if you dislike the current political climate, remember: Markets persist beyond any one presidency. Avoid letting short-term fears derail your long-term investment strategy.
Employment
A recession is typically linked to higher levels of unemployment. As consumers spend less, companies trim their workforces to compensate for lower demand.
“Unemployment is likely to go up as the economy slows, in all likelihood, and inflation is likely to go up as … some part of those tariffs come to be paid by the public,” Powell reportedly said during his appearance at the Economic Club of Chicago.
In 2023, The Conference Board predicted that workers in information services, transportation, warehousing and construction were most at risk for job loss during a future recession. The hospitality, manufacturing, retail and real estate industries have also been historically affected during recessions.
Also, note that there is a reduction in hirings across the board right now. Before layoffs, there is typically a hiring freeze. This is a potential indicator of what is to come.
Investments
Recession-related economic uncertainty can cause stock market swings. These may result from lowered earnings (and lower forward earnings guidance) by companies, but they also reflect investor concerns about the state of the economy.
Already, we are seeing investments impacted by tariffs and uncertainty. The S&P 500 dropped by more than 7% during the first 100 days of Trump’s second term. That’s the largest drop during that 100-day period since the start of Richard Nixon’s second term in 1973.
A bright spot for investors, though, is the price of gold. Historically seen as a safe haven during periods of economic instability, the value of gold has hit record highs in 2025.
How to invest in gold
If you’re thinking about it, consider a gold IRA. American Hartford Gold, our choice for the best gold IRA provider, is currently offering a Freedom Package worth $15,000 to those opening a new precious metals IRA.
Cost of living
Inflation can increase prices and raise the cost of living. In some cases, it can even spur a recession.
However, recessions themselves don’t always lead to inflation. Fidelity Investments notes that reduced consumer spending during a recession can lead some prices to fall in response to reduced demand. That said, some recessions have been associated with high inflation, such as the economic downturn of the 1970s (aka stagflation).
For those worried about inflation, gold is often considered an attractive investment since it has historically maintained its value. Learn more about buying gold in our guide to the best gold dealers.
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