US Economy Slowing, But Recession Seems Unlikely — Evening Brief – 04.02.25
Recent surveys, often referred to as “soft data,” indicate growing concerns that a U.S. recession may be on the horizon. For example, the Conference Board’s consumer survey expectations index for March dropped to its lowest level in 12 years, signaling a pessimistic outlook among consumers. A major factor fueling this worry is the belief that tariffs could slow economic growth, potentially tipping the U.S. into a recession.
However, the picture isn’t so straightforward. While surveys highlight these fears, actual economic data—known as “hard data”—tells a different story. Sources reflecting real economic activity suggest the economy remains robust for now. Given this disconnect, it’s wise to approach recession predictions with caution unless the hard data begins to show clear and consistent signs of trouble.
To that end, three weekly updated indicators are recommended as reliable tools for assessing the economy’s health based on solid data, not just speculation.
The Dallas Fed’s Weekly Economic Index (WEI) provides a real-time snapshot of the U.S. economy by tracking 10 indicators across the consumer sector, labor market, and production activity. As of last week, the WEI stood at 2.1%, a level that indicates moderate economic growth.
For context, this reading is slightly below the 2.5% GDP growth recorded for the year through the fourth quarter of 2024. The fact that the WEI is easing points to a potential slowdown in momentum across these areas. However, remaining at 2.1% means growth persists, and the economy is not currently signaling recessionary conditions.
The Philly Fed’s ADS (Aruoba-Diebold-Scotti) Index is a real-time measure of U.S. economic activity, combining several key indicators such as employment, manufacturing, and consumer spending to provide a broad snapshot of the economy. Its latest reading of 0.24, while the lowest in nearly two months, remains above zero, signaling that economic activity is still above its historical average.
Weekly jobless claims, which measure new unemployment benefits, are a crucial real-time indicator of economic conditions. They often rise before and during recessions, serving as an early-warning sign for the labor market. Currently, these claims are low, staying close to their lowest levels in decades.
The economic situation is dynamic and shifting. The WEI and ADS indexes highlight a slowdown in economic activity, prompting concerns about a potential recession. However, the future remains uncertain, as much depends on the direction of U.S. tariff policies and the responses from other countries, which could trigger significant changes in a short time.