U.S. recession before May 2025?

The question of whether the U.S. will experience a recession before May 2025 hinges on complex economic indicators and the NBER's official determination process. The search results reveal a mix of expert opinions, with some economists predicting a mild recession in early 2024 while others suggest a "soft landing" scenario is more likely. Current economic data shows declining inflation, stable job growth, and resilient consumer spending, though leading indicators have shown 20 consecutive months of decline. The market's current pricing (13.5% Yes / 86.5% No) appears to reflect growing confidence in a soft landing scenario, supported by the Federal Reserve's successful navigation of inflation challenges and strong economic performance through 2023. However, several risks remain, including lagged effects of interest rate hikes, potential commercial real estate stress, and the possibility of external economic shocks.

Economic Background

Current Economic Conditions

• Inflation has declined from 8.9% peak to 3.1% as of November 2023
• Job market remains strong with unemployment between 3-4%
• GDP growth projected at 2.5% for Q4 2023
• Leading Economic Indicators (LEI) show 20 consecutive months of decline

Federal Reserve Policy

• Over 500 basis points of rate hikes since March 2022
• Expected to begin cutting rates in 2024
• Attempting to achieve "soft landing" while controlling inflation

Outcome Analysis

Scenario 1: Recession Declared (13.5%)

Supportive factors:

• Lagged effects of aggressive rate hikes still working through economy
• Historical precedent of LEI decline preceding recessions
• Some economists predict mild recession in H1 2024
• Commercial real estate vulnerabilities
• Rising credit card delinquencies

Scenario 2: No Recession (86.5%)

Supportive factors:

• Strong labor market persistence
• Declining inflation without significant economic damage
• Resilient consumer spending
• Expected Fed rate cuts in 2024
• Healthy household balance sheets

Key Factors to Watch

1. Labor Market Metrics

• Unemployment rate trends
• Job creation numbers
• Wage growth

2. Leading Indicators

• Conference Board LEI
• Manufacturing new orders
• Consumer confidence

3. Financial Conditions

• Credit availability
• Commercial real estate performance
• Consumer delinquency rates

4. Federal Reserve Actions

• Timing and pace of rate cuts
• Forward guidance
• Balance sheet management

Recent Developments

• New recession indicator by Michaillat & Saez shows 40% probability of recession as of July 2024
• Conference Board forecasting "short and shallow" recession in H1 2024
• Prometheus Macro tracking shows 37% recession probability
• Some analysts suggesting NBER might backdate recession start to October 2023