Important Recession Indicators
Currently, there are increasing signs of an impending recession in the USA, although some superficial economic data still suggest stability.
1. Inverted Yield Curve
A key warning signal is the long-standing inverted yield curve in the USA, where short-term interest rates are above long-term rates. Historically, this configuration has typically occurred a few months before a recession and is considered a reliable early indicator of an economic downturn. Investors interpret this as the Federal Reserve potentially being forced to lower interest rates in the medium term to avert an economic collapse.
2. Leading Economic Index (LEI)
The LEI, published by The Conference Board, fell by 1.0% in April 2025, more than in previous months. The six-month development of the LEI shows a deterioration in most of its components, such as consumer expectations, building permits, and average hours worked in industry. These trends signal a growing weakness in economic growth, with a forecasted decline in US GDP growth from 2.8% (2024) to 1.6% (2025). However, the index has not yet reached the level that typically indicates a recession.
3. Labor Market – Deceptive Stability
The official unemployment rate remains low and close to historical lows; for example, non-farm employment is nearly at all-time highs. Yet more detailed analyses reveal hidden weaknesses: many formerly highly skilled workers are now employed in low-wage service jobs (e.g., delivery services or retail), distorting the picture of a robust labor market. Additionally, it is criticized that traditional labor market statistics do not adequately capture workers in the gig economy sector.
Conclusion
The combination of a long-inverted yield curve – a historically strong indicator – the significant decline in leading economic indicators, and hidden weaknesses in the labor market suggests that the US economy is indeed moving towards a possible recession. Growth is weakening, and structural problems are becoming more visible despite seemingly stable superficial data.
While a definitive confirmation is still pending, these indicators urgently warn of an economic downturn in the near future.