US Treasury Secretary Scott Bessent declined to rule out the possibility of recession hitting the US economy shortly. “There are no guarantees” when it comes to a potential recession hitting the United States. “Like who would have predicted COVID?”
Bessent told NBC’s Kristen Welker when asked on “Meet the Press” whether he could reassure Americans about the country’s economic future. I can predict that we are putting in robust policies that will be durable,” Bessent added, including trying to “wean our country off” of “massive government spending.” His comments come as other members of President Donald Trump’s administration, including the president himself, have similarly hesitated to make promises about what is to come for the nation’s finances.
Meanwhile, consumer confidence has plunged, and 54% of voters in a recent NBC News poll say they disapprove of Trump’s handling of the economy. J.P. Morgan’s chief economist said last week that there is a 40% chance of a U.S. recession in 2025. I hate to predict things like that,” Trump told Fox host Maria Bartiromo last week when asked about the possibility of a recession this year.
Trump promised a boom: Now he is bracing Americans for economic turbulence. “There is a period of transition,” the president continued, “because what we’re doing is very big.” Bessent this weekend said he believes there’s “no reason” that an adjustment period has to mean recession.
“I can tell you that if we kept on this track, what I could guarantee is we would have had a financial crisis,” Bessent said, referring to spending levels and policies prior to Trump taking office. “We are resetting, and we are putting things on a sustainable path.”
The Treasury secretary said he is also not worried about the stock market, coming out of a particularly tumultuous week. U.S. stock markets closed down sharply last week amid mounting uncertainties arising from Trump’s frequently shifting policies, including tariff threats against the biggest U.S. trading partners.
“I’ve been in the investment business for 35 years, and I can tell you that corrections are healthy. They are normal,” Bessent told NBC.
The broad S&P 500 index dropped into correction territory on Thursday, after Trump escalated risks of a trade war with the European Union. A correction is at least 10% down from a record high, which for the S&P 500 was set on February 19.
“One week does not the market make,” Bessent said.
Is the US really heading into a recession?
Trump does not see a recession, telling US will ‘boom.’
During his election campaign last year, Donald Trump promised Americans he would usher in a new era of prosperity.
Now two months into his presidency, he is painting a slightly different picture.
He has warned that it will be hard to bring down prices and the public should be prepared for a “little disturbance” before he can bring back wealth to the US.
Meanwhile, even as the latest figures indicate inflation is easing, analysts say the odds of a downturn are increasing, pointing to his policies.
So, is Trump about to trigger a recession in the world’s largest economy?
Markets fall and recession risks rise.
In the US, a recession is defined as a prolonged and widespread decline in economic activity typically characterised by a jump in unemployment and fall in incomes.
A chorus of economic analysts have warned in recent days that the risks of such a scenario are rising.
A JP Morgan report put the chance of recession at 40%, up from 30% at the start of the year, warning that US policy was “tilting away from growth”, while Mark Zandi, chief economist at Moody’s Analytics, upped the odds from 15% to 35%, citing tariffs.
The forecasts came as the S&P 500, which tracks 500 of the biggest companies in the US sank sharply. It has now fallen to its lowest level since September in a sign of fears about the future.
The market turmoil is being driven partly by concerns about new taxes on imports, called tariffs, which Trump has introduced since he took office.
He has hit products from America’s three biggest trade partners with the new duties and threatened them more widely in moves that analysts believe will increase prices and curb growth.
The latest official inflation figures in the US showed the rate of price increases cooling in February, however.
Prices were up 2.8% over the 12 months to February, down from 3% in January, the Labor Department said.
Still, Trump and his economic advisers have been warning the public to be prepared for some economic pain, while appearing to dismiss the market concerns – a marked change from his first term, when he frequently cited the stock market as a measure of his own success.
“There will always be changes and adjustments,” he said last week, in response to pleas from businesses for more certainty.
The posture has increased investor worries about his plans.
Goldman Sachs last week raised its recession bets from 15% to 20%, saying it saw policy changes as “the key risk” to the economy. But it noted that the White House still had “the option to pull back if the downside risks begin to look more serious”.
“If the White House remained committed to its policies even in the face of much worse data, recession risk would rise further,” the firm’s analysts warned.
Tariffs, uncertainty and slowing growth.
For many firms, the biggest question mark is tariffs, which raise costs for US businesses by putting taxes on imports. As Trump unveils tariff plans, many companies are now facing lower profit margins, while holding off on investments and hiring as they try to figure out what the future will look like.
Investors are also worried about big cuts to the government workforce and government spending.
Brian Gardner, chief of Washington policy strategy at the investment bank Stifel, said businesses and investors had thought Trump intended tariffs as a negotiating tool.
“But what the president and his cabinet are signalling is actually a bigger deal. It is a restructuring of the American economy,” he said. “And that’s what’s been driving markets in the last couple of weeks.”
The US economy was already undergoing a slowdown, engineered in part by the central bank, which has kept interest rates higher to try to cool activity and stabilise prices.
Retail sales fell in February, confidence – which had popped after Trump’s election on several surveys of consumers and businesses – has fallen, and companies including major airlines, retailers such as Walmart and Target, and manufacturers are warning of a pullback.
Some analysts are worried a drop in the stock market could trigger a further clampdown in spending, especially among higher income households.
That could deliver a major hit to the US economy, which is driven by consumer spending and has grown increasingly dependent on those richer households, as lower income families face pressure from inflation.
How Trump’s stock market rhetoric has shifted over the years.
The head of the US central bank, Jerome Powell, offered assurances in a speech last week, noting that sentiment had not been a good indicator of behaviour in recent years.
“Despite elevated levels of uncertainty, the US economy continues to be in a good place,” he said.
But the US economy is currently deeply linked to the rest of the world, warned Kathleen Brooks, research director at XTB.
“The fact that tariffs could disrupt that at the same time that there were signs that the US economy was weakening anyway … is really fuelling recession fears,” she says.
Stock market in tech ripe for correction.
The unease in the stock market is not all about Trump.
Investors were already jittery about the possibility of a correction, after big gains over the last two years, driven by the sharp run-up in tech stocks fuelled by investor optimism about artificial intelligence (AI).
Chipmaker Nvidia, for example, saw its share price jump from less than $15 at the start of 2023 to $150 in November of last year.
That type of rise had stirred debate about an “AI bubble” – with investors on high alert for signs of it bursting, which would have a substantial impact on the stock market, regardless of the dynamics in the wider economy.
Now, with views of the US economy darkening, optimism about AI is getting even harder to sustain.
Tech analyst Gene Munster of Deepwater Asset Management wrote on social media this week that his optimism had “taken a step back” as the chance of a recession increased “measurably” over the past month.
“The bottom line is that if we enter a recession, it will be extremely difficult for the AI trade to continue,” he said.
President Trump sparked concerns, when he declined to rule out the possibility of a U.S. recession this year. Asked on Fox news if he expects such a slump, Mr. Trump said, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
U.S. Commerce Secretary Howard Lutnick also seemed to leave open the possibility of a downturn, telling CBS News in an interview that Mr. Trump’s economic policies are “worth it” even if they lead to a recession.
While it is notoriously hard to predict a recession, there are definitive criteria that must be met for a business cycle to be considered recessionary. Here is what to know.
What is a recession, and who decides if we are in one?
A recession is defined as a broad-based, persistent decline in economic activity. The more popular metric is that a recession is two straight quarters of negative economic growth, although in fact there is more to it than.
Recession is identified by the National Bureau of Economic Research (NBER), a non-profit, nonpartisan research group that dates U.S. business cycles. To determine if the economy has entered a recession,
NBER evaluates six key indicators: real personal income; non-farm payroll employment; employment as measured by the household survey; personal consumption; manufacturing and trade sales; and industrial production.
More specifically, NBER looks at the depth of the changes in these indicators, how broadly a slump is affecting different industries and how long a downturn lasts. The upshot: In a recession, the decline in economic activity must be significant, sustained and widespread, rather than limited to a particular sector.
Could the U.S. tumble into a recession anytime soon?
For now, economic data suggest that is unlikely. Although layoffs around the country are rising, the U.S. labour market continues to create jobs at a decent clip. Despite economic growth slowing, it is not expected to fall off a cliff. In fact, Julia Pollack, chief economist at career site ZipRecruiter, notes that four of the six signals tracked by the NBER point to continued economic expansion.
“Right now, things feel uncomfortable given the significant amount of policy uncertainty, the federal layoffs, and we’ve seen business, consumer and investor sentiment fray,” Ryan Sweet, chief U.S. economist at Oxford Economics, told CBS MoneyWatch. “So, to some it feels like the economy is in a recession, but we are not there yet.”
Still, cracks are appearing that could portend a sharper downturn down the road. Retail spending, which is the lifeblood of the economy, is waning, while measures of consumer confidence show a sharp deterioration of late. Investor concerns about the Trump administration’s barrage of tariffs on other nations has also slammed stock prices, which could further pressure spending.
“Negative consumption is concerning because consumer spending is backbone of U.S. economy,” Pollack said. “And it’s not just that spending fell. Sentiment has fallen, household budgets are squeezed, and consumers are more vulnerable to shocks, which has heightened recession fears.”
Sweet added, “Right now, your traditional causes of a recession aren’t flashing red, but we just have this suffocating effect of all the uncertainty around trade and fiscal policy and immigration.”
Lutnick, the Commerce Department chief, defends Mr. Trump’s economic policies, saying they will boost economic activity.
“The only reason there could possibly be a recession is because the Biden nonsense that we had to live with. These policies produce revenues. They produce growth. They produce factories being built here,” he told CBS News on Tuesday.
What signals would point to a recession?
The clearest sign would be a steady increase in job losses and a jump unemployment. In a recession, consumers pare spending, and businesses pull back on investment. That typically leads to a slowdown in hiring and rise in layoffs.
The nation’s unemployment rate did tick up last month, to 4.1% from 4%, though that is still quite low. But employers added 151,000 jobs, a sign that businesses are still seeking to hire workers, and enough payroll gains to keep unemployment in check.
Many economists monitor the number of people who seek unemployment benefits each week, a gauge that indicates whether layoffs are worsening. Weekly jobless claims remain low.
Who is most vulnerable in a recession?
Most Americans would feel the impact of a recession in one way or another, for weaker hiring to tepid wage gains. Among people who are employed, those who entered the labour market last tend to be the first to lose their job in a recession, noted Alex Jacquez, chief of policy and advocacy at the Groundwork Collective, a left-leaning economic think tank.
“So you see the people who are hardest to reach as we reach full employment are the first to get laid off. That includes lower wage workers, black workers, Latino workers. Those who have the hardest time getting a job when times are good are first to lose jobs when times are bad,” he said.
Americans who carry debt on their homes and cannot make minimum payments also can face foreclosure in a downturn, locking a generation out of building household wealth.
“That’s one reason why recessions are so damaging, because it’s the least among us that get hurt the most when downturns come,” Jacquez said.
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