The US economy is under pressure, and a collapse in oil prices could cause it to collapse.
“People are getting ready for the fact that we’re either down now or there’s a very good chance we’ll be in the same place soon,” said Hady Farag, partner and co-director of the Boston Consulting Group.
Problem: Recession times are very difficult. How do we know? That idea was from a CNN story in July 2022.
That was when oil was hovering above $100 and gas prices were around $5 a gallon. But the US economy I did not enter recession in 2022. Or in ’23. Or in ’24. Or in ’25.
There is reason to worry now. President Donald Trump’s economic agenda, including his tariffs and immigration policy, created a cloud of uncertainty. And now we’re struggling with high energy prices, which have preceded eight of the last nine recessions.
“People are still very concerned about a trade war,” said Dan Suzuki, a portfolio strategist at Richard Bernstein Advisors. “Financial markets continue to show signs of fear of recession.”
Whoops, that quote was from a 2018 CNN story. (Also, no recession then, BTW).
Economists have been predicting or warning of a recession every year for the past eight years, and they were right just once – kinda.
2018
-
S&P Global has raised its recession risk, saying economic growth is at its lowest point.
-
The yield curve is inverted, a classic (if flawed) form of recession. That’s basically what happens when investors choose long-term Treasurys because, in theory, a downturn is imminent.
2019
2020
-
OK, partial credit here: America’s economy is in short supply, very deep, but very presented The recession in February and March due to this epidemic, when the world agreed to close the economy for a short period of time.
2021
2022
2023
2024
2025
-
Trump’s historic tariffs sent markets into a frenzy, and Wall Street banks raised their default risks to 50-50 in April.
-
Inflation picked up slightly and the job market picked up during the year. Consumer spending fell toward the end of the year, raising some fears of a recession.
2026
-
Economists are still worried that the already weak economy is at risk of a shock – as are oil prices, which are on an all-time high.
-
Growing uncertainty for businesses and consumers about the path of the economy threatens to further damage an already weak labor market and raise inflation fears.
Economists have several theories as to why the US economy appears to be on the verge of a recession without falling into another.
1) The concept of “rolling recession”.: Several sectors have declined in the economy while other sectors have prospered at the same time.
By 2022, the technology sector was collapsing as production increased. By 2024, manufacturing was collapsing while the semiconductor business was growing rapidly. In the past year, the power, luxury and social sectors have declined while AI has been a megaboom. This year, energy is being restored, which may protect the economy from financial and retail weakness – and some concerns about AI investments.
“People are asking when the recession is coming. Man, if you’re in high tech, it happened 3 years ago,” said John M. Veitch, dean of the business school at the University of Notre Dame de Namur in California, referring to the 2022 tech bear market.
An extreme example of a recession was Australia, which went 28 years without a full-blown recession because the property boom that began in 1992 crippled the entire economy.
2) The theory of K structure: Wealthy Americans continue to spend despite high prices, because they are protected from other economic problems.
People above K typically own homes and have money in the market, while many people in the lower K bracket are struggling. Strong spending by wealthy Americans offsets the financial strain of low-income households, preventing the broader economy from collapsing.
3) Front loading conceptTrump often threatens tariffs as a negotiating tool and rarely implements them immediately. That gave businesses and consumers a window to load and collect, increasing spending.
When he doesn’t follow it, which he usually doesn’t, people continue to use it, said Heather Long, chief economist at Navy Federal Credit Union.
So is this the year?
Greg Daco, chief economist at EY-Parthenon, recently cut his odds of a recession to 40%, a number he says could rise rapidly if the Middle East conflict escalates in intensity or lasts longer. As each week passes, higher costs (and higher risks) become more prevalent in the economy.
“There is a real risk of recession,” said Long. But you don’t want to be the economist who called wolf.
#recession #confirmed #CNN #Business