The U.S. is seeing stock markets taking big hits, but could a recession be in the offing? Natalie Martinez discusses the situation with finance experts.
Fears of a recession have begun to rise in recent weeks, and comments by President Donald Trump this weekend put the issue into sharp focus.
During an interview with Fox News, Trump declined to rule out a possible recession in the U.S. economy, saying instead that the economy is going through a “period of transition.”
As questions about the economy continue, we examine when the country’s last recession occurred, and what some economists are saying about the possibility of one occurring in coming months.
What is a recession?
A recession can be defined as a “significant downturn in economic activity reflected in a decline in the growth of gross domestic product,” according to Mercer University. Dr. Antonio Saravia says the “conventional definition” of a recession is when there is negative growth in the GDP in two consecutive quarters.
Unemployment rates and payroll data can also be used to determine the start and end dates of a recession, according to economists.
The National Bureau of Economic Research also holds that significant declines in economic activity must be evaluated on their depth, diffusion and duration.
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When was the last recession the U.S. experienced?
The last recession the U.S. experienced, according to the NBER, occurred during the early days of the COVID pandemic in 2020, when millions of Americans were forced out of work and large-scale shutdowns took place.
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That recession was short-lived, only lasting a matter of months. The federal government responded to the pandemic with a massive infusion of money into the economy, which helped contribute to post-pandemic inflation, according to economists.
Prior to the pandemic, the last recession the U.S. experienced occurred between 2007 and 2009, and is now known as the “Great Recession,” the most significant economic downturn since the Great Depression.
A massive collapse of the U.S. housing market helped fuel the recession, with a slew of major banks forced to seek out huge government bailouts to help stay afloat during the crisis, according to Britannica.
Is the U.S. at risk of a recession?
The president declined to rule out the possibility of a recession, and a massive sell-off took place on Wall Street Monday. The S&P 500 closed down 2.7%, and the Nasdaq dropped by 4%, knocking it more than 10% off of its recent high watermark.
Tariffs from China on U.S. agricultural products went into effect Monday. Canada also instituted 25% increases on electricity exports to the U.S. in response to Trump tariffs.
Trump told Fox News that the economy is going through a “period of transition,” but defended his administration’s economic policies and the tariffs implemented on China, Canada and Mexico.
The Federal Reserve Bank of Atlanta's GDPNow tool is currently projecting that the GDP in the first quarter may decline by 2.4%, the first quarterly contraction seen in the U.S. since 2022.
According to CNN, a combination of increasing layoffs, an uptick in inflation and rising consumer prices could be indicators of an economic downturn, but quotes economists as saying the current situation could simply be a “cooling” of private sector activity.
Sam Stovall, chief investment strategies at CFRA Research, told CNBC the current situation is a reaction to the Trump administration’s tariff policies.
“We are in the throes of a manufactured correction," he said. "I say manufactured because it’s really based in response to the new administration’s tariff programs, or at least threats of tariffs, and what kind of an impact that will have on the economy."
Stovall did say that there is a possibility the recent market downturns are part of a “typical pullback,” and that there could be a “resetting of the dials” after recent records set on the stock exchanges.
