Economists are closely monitoring various indicators to assess whether the U.S. economy will sustain growth or slip into a recession in 2025, particularly amid President Donald Trump’s tariff policies. Past Federal Reserve leaders like Al Broadus gauged economic health by tangible signs, such as railroad traffic, while Alan Greenspan tracked scrap steel prices. Today’s experts rely on a mix of “soft” and “hard” data to navigate rising inflation and slowing growth.
Karen Dynan, a Harvard economics professor and Peterson Institute senior fellow, attributes the economy’s slowdown to Trump’s tariffs, estimating a 40% chance of recession within the next year. She anticipates possibly just one quarter of negative growth, short of the two consecutive quarters typically defining a recession. Economists, however, look beyond this, seeking a sharp drop in economic activity. The Atlanta Fed’s GDPNow gauge projects a slight 0.1% contraction for Q1 2025, hinting at a potential “technical recession” with minimal decline.
Ryan Sweet, chief U.S. economist at Oxford Economics, predicts a volatile pattern: a negative Q1, a Q2 rebound, and another weak quarter. He identifies four pressures—tariff-driven demand shocks, supply chain disruptions, market turbulence, and uncertainty—clouding the outlook. Sweet emphasizes business behavior as an early warning, noting that firms first cut equipment spending and hours before resorting to layoffs, which then dampen consumer confidence. He monitors core capital goods orders and shipments, alongside consumer indicators like vehicle sales, TSA checkpoint traffic, and services spending, which signal shifts in sentiment.
The U.S. economy, robust in recent years, faces headwinds from tariffs, which crimp income and raise costs. Consumer spending, a key driver, is softening, as evidenced by both surveys and hard data. While U.S. labor force growth and productivity have historically outpaced Europe and Japan, avoiding deep downturns, the current climate tests this resilience. A technical recession, common abroad, could emerge if growth falters without a steep collapse.
As businesses and consumers brace for tariff impacts, economists warn of persistent uncertainty. Sweet’s “dark clouds” metaphor captures the challenge: firms hesitate to invest, and consumers may retreat if conditions worsen. Vehicle sales reflect confidence, while reduced travel or dining spending could foreshadow broader cuts. For now, economists see a bumpy road, with tariffs shaping a precarious economic trajectory that demands vigilant tracking of these critical indicators.
