Updated May 2, 2025 at 6:53 AM CDT
As the U.S. economy shrinks, fears and predictions of a recession continue to grow.
New Commerce Department data shows that the country's gross domestic product (GDP) contracted at an annual rate of 0.3% in the first quarter of the year — after growing at a solid pace of 2.4% in the final months of 2024.
That decline, it says, was largely due to a surge in imports as businesses and consumers rushed to stock up on products before the Trump administration's tariffs took effect in early April.
Trump's announcement of sweeping baseline and "reciprocal" tariffs on goods from countries around the world rattled consumers and roiled global markets, prompting pushback from Wall Street, Capitol Hill and foreign leaders.
Trump paused most of the country-specific tariffs to allow for three months of negotiations, though he increased tariffs on Chinese goods to 145%. But the threat of a trade war — and general economic uncertainty — is still making people uneasy.
Google searches for the term "recession" surged in early April. The Conference Board data shows that consumer confidence fell in April to its lowest level since the start of the COVID-19 pandemic, while the proportion of consumers anticipating a recession over the next 12 months rose to a two-year high.
Economists at prominent investment banks are also upping their recession predictions. In April, Goldman Sachs raised the probability of a U.S. recession to 45% in the next 12 months, while JP Morgan upped its risk of a global recession to 60%.
"Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth," its CEO Jamie Dimon wrote in his annual letter to investors.
What does being in a recession mean, and how would we know if the U.S. enters one? Here's how the process works.
What is a recession?
A recession refers to a period of decline in economic activity. It's one of the four stages of the economic cycle: growth, peak, contraction (or recession) and trough.
Some analysts use a rough rule of thumb to identify recessions: Two consecutive quarters of decline in a nation's gross domestic product (GDP) — the broadest measure of economic activity.
But the National Bureau of Economic Research (NBER) — the nonpartisan, nonprofit research organization that has become the semi-official arbiter of recessions — uses a somewhat squishier definition. It describes a recession as a "significant decline in economic activity that is spread across the economy and that lasts more than a few months."
Who declares a recession?
The job of documenting the economic cycles, including recessions, does not fall to the federal government.
Instead, the NBER's Business Cycle Dating Committee — made up of top American economists — has been declaring the beginning and end of the cycles since its creation in 1978 (NBER itself is decades older).
There is no fixed rule about how long NBER takes to identify a recession after a decline has started. Its website says that past determinations have taken anywhere from four to 21 months.
"We wait long enough so that the existence of a peak or trough is not in doubt, and until we can assign an accurate peak or trough date," NBER says.
For example, it announced in June 2020 that the U.S. had officially entered a pandemic-induced recession months earlier, in February. It announced over a year later that the 2020 recession had ended in April after just two months, making it the shortest U.S. recession on record.
What happens in a recession?
A shrinking economy can cause a cascade of stressful ripple effects, including lower employment, deteriorating stock market results and higher borrowing costs for consumers and companies, according to Fidelity.
For example, people may not want to spend as much, which can impact the businesses they would otherwise support, which can lead to layoffs and in turn harm companies' performance in the stock market — further fueling the cycle.
Mark Zandi, chief economist at Moody's Analytics, told NPR in March that consumer confidence and discretionary spending were already on the decline before Trump introduced the steeper tariffs.
"It's the consumer that's feeling the brunt of it first, and with good reason," he said. "But … the way you get to recession is businesses see the weakening in their sales, and if they start laying off workers, then we're done. We're going into a recession."
How rare are recessions?
Various factors can jolt the economy into a recession, from unexpected events (like pandemics and wars) to asset bubbles bursting to excessive inflation or deflation.
The U.S. has experienced 34 recessions since 1857, according to NBER data.
They varied considerably in length, from two months (2020) to more than five years (The Panic of 1873, which triggered the "Long Depression").
Since World War II, the average length of a recession has been 11.1 months, according to the business publication Kiplinger. The post-WWII U.S. has averaged a recession every 6.5 years, it adds.
The longest post-WWII recession was the Great Recession, which spanned 18 months from December 2007 to June 2009 and was triggered when the U.S. housing bubble burst. The most recent was the brief COVID-19 recession in 2020. While the economy experienced two quarters of negative GDP growth in early 2022, fueling fears of a recession, NBER did not declare one.
Depressions are much more severe and rare: Merriam-Webster says they are characterized by widespread unemployment and major pauses in economic activity. NBER does not specifically identify depressions, but says the U.S. is generally regarded to have last experienced one in the 1930s.
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