As tariff uncertainty continues to roil U.S. stock markets, a growing number of economists are warning that the world’s largest economy could be edging closer to a recession. Even officials within President Donald Trump’s administration have refused to rule out the possibility. But how close are we, really? And how would we know when we’ve crossed the line into recession territory?

What Defines a Recession?

According to the National Bureau of Economic Research (NBER)—the nonpartisan group responsible for officially declaring recessions—a downturn typically involves a broad and sustained decline in economic activity. However, the most common definition used in financial circles is two consecutive quarters of negative GDP growth.

“We wouldn’t officially know we’re in a recession until we’re already in one,” explained CBS MoneyWatch correspondent Kelly O’Grady.

Are We in a Recession Yet?

For now, the answer appears to be no. While unemployment ticked up slightly last month—from 4% to 4.1%—it remains historically low. The U.S. added 151,000 jobs in February, signaling that businesses are still hiring. Retail sales also rose, although at a slower pace than anticipated.

Ryan Sweet, Chief U.S. Economist at Oxford Economics, noted:

“It feels uncomfortable given policy uncertainty and weakening sentiment, but we’re not there yet.”

What Are the Warning Signs?

Economists point to diminishing consumer and investor sentiment, federal layoffs, and rising policy uncertainty as flashing amber lights. The risk of a recession isn’t imminent, but the conditions warrant close monitoring.

O’Grady highlighted that while unemployment and inflation remain relatively stable, there are subtle signs of strain:

“The unemployment rate is slightly elevated, inflation is up half a percent compared to September, and consumer sentiment is fraying.”

The Threat of Stagflation

Beyond recession fears, some economists warn of the possibility of stagflation—a toxic mix of stagnant growth and high inflation. The U.S. hasn’t seen this since the 1970s, when surging oil prices and reduced consumer demand crippled the economy.

“Stagflation is an economic balancing problem,” O’Grady explained. “High inflation pushes rates up, dampening demand and potentially stalling growth.”

What Could Tip the Scales?

The wildcard remains the Trump administration’s trade and tariff policies, which could disrupt growth and add inflationary pressures. So far, economic fundamentals have held up—but the balance is fragile.

The Federal Reserve’s next moves will be pivotal. If growth slows further, rate cuts could provide relief, but if inflation persists, tightening might be necessary.

Bottom Line: While the U.S. economy isn’t in a recession yet, the combination of tariff uncertainty, rising inflation, and weakening sentiment means economists are watching closely.

“We’re not flashing red lights yet,” said O’Grady. “But the warnings are getting louder.”

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

Related: How often do market corrections lead to a recession in the US? – Research

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