Al Broadus, the former president of the Richmond Federal Reserve Bank, used to cite the traffic on a train line he traveled twice a day on his way to and from work as his favorite indicator of the state of the American economy. Good times were indicated by the abundance of boxcars. Leaner times were indicated by a lack of traffic.
For his part, former Fed Chair Alan Greenspan frequently discussed taking a nap in his bathtub and reading scrap steel price reports, which he believed to be a reliable gauge of economic activity.
What will analysts be keeping an eye on right now to determine whether the US economy will enter a catastrophic recession or manage to scrape out some growth this year?
Economists can see that the robust U.S. economy of the last several years is giving way to slower growth and increased inflation when they consider the big picture. According to Karen Dynan, a senior fellow at the Peterson Institute for International Economics and a professor of the practice of economics at Harvard University, this is a result of the tariffs that the Trump administration has declared.
Although it may be more likely that there will just be one quarter of negative growth, she projects a 40% chance of a U.S. recession during the following 12 months.
Dynan’s projection for each quarter of this year is broken out in the following chart:
It is commonly accepted that a recession is defined as two consecutive quarters of negative growth. However, economists have a more complicated definition of a recession; they look for a sharp drop in economic activity.
A’stagflationary’ recession is 65% likely, according to one leading U.S. economist.
As the year started, the U.S. economy was already slowing down. Additionally, as 2025 has gone on and President Donald Trump’s tariff plan has been more apparent, businesses and consumers have become increasingly concerned about the prospects. This is evident in more than just polls and “soft” data. There has also been a downturn in so-called “hard” indicators, such as consumer expenditure.
According to the Atlanta Fed’s GDPNow measure, which accounts for unique circumstances, the economy shrank by a meager 0.1% annually during the January–March quarter.
A “technical recession,” in which growth slows slightly but economic activity does not fall, could hit the economy. According to Ryan Sweet, senior U.S. economist at Oxford Economics, this has been more typical in Europe and Japan, but productivity and labor force growth in the United States have typically kept the country’s economy growing at a quicker rate.
According to Sweet, the U.S. economy will exhibit a seesaw pattern, with a first quarter that is negative, a second quarter that is positive, and then another quarter that is weaker.
According to him, the economy would be impacted by four factors at once: a shock to demand as the import tax stifles income growth, companies searching for supply, financial market volatility, and anxiety regarding the future.
“The dark clouds of uncertainty are here to stay,” Sweet stated.
Contrary to common assumption, firms are the first to make cuts during a recession, he said, adding that he would be keeping an eye on new orders and shipments of critical capital items.
“Before making layoffs, businesses reduce their expenditures on equipment and labor hours. Customers rush to the bunker at that point, and it takes some time to get them to leave again, Sweet added.
According to him, the flow of traffic through TSA checkpoints and vehicle sales are both solid indicators of consumer confidence. Spending less on services would also be a red flag.
This is not the time to forecast recessions using obscure data sources like scrap metal or train traffic, according to David Seif, chief economist for developed markets at Nomura.
According to him, the trade war will cause the economy to become scarcer in terms of products than it has been since the 1930s.
“If there’s going to be a recession, it’s going to be a very unevenly caused type of recession,” Seif stated.
People should therefore monitor economy-wide data, including layoffs, to assess the state of the economy.
According to him, “layoffs will be a decent indicator of what is going on,” and the total number of layoffs will be significant. Significant layoffs would result in drastic spending reductions.
Another situation is when the unemployment rate remains low but workers’ purchasing power declines, resulting in a weaker economy.
“It is going to feel like a recession to a lot of people, especially low-income households, because tariffs are regressive,” Sweet stated.
Ultimately, he stated, the tariff level is possibly the most accurate indicator of a recession.
The Yale Budget Lab estimates that the current effective tariff rate is 27%, the highest since 1903.
“We’ve already run out of options. Currently, the economy is virtually operating at stall pace. “It’s over if the tariff rate continues to rise,” Sweet stated.
