How to Know Which Recession Indicators Are Real

Just about anything is a #RecessionIndicator on social media these days. A Dunkin’ Donuts shuttering in Boston? Recession indicator. The return of the ice bucket challenge? Apparently, that’s one too. 

Gallows humor is a coping mechanism, and I know it well. Recession memes may be a bit of a cultural zeitgeist, but underneath, there’s real anxiety about the economy. When more of us are dependent on credit for basic necessities like groceries, bracing for a formidable storm doesn’t seem so tongue-in-cheek. 

This week, we got more indicators: The US economy shrank by 0.3% in the first quarter, the biggest drop in GDP since 2022, and weekly jobless claims surged to 241,000, up 18,000 from the previous week. President Donald Trump’s erratic tariff agenda and austerity measures paved the way by driving up prices on consumer goods, shaking up the stock market and sparking widespread consumer pessimism. 

Some economists say things aren’t that bad, at least based on formal metrics. But for most of us, the dread of a recession doesn’t neatly align with official start and end dates. The warning signs — job losses, tighter budgets, overall uncertainty — often create panic long before there’s a consensus. 

Your financial health is more than just a vibe. 

What we experience in our bones often clashes with official economic data. It explains why we seek out cultural trends like the hemline index (a historical correlation between skirt lengths and the state of the economy) or the lipstick index (sales of lipstick increase during economic downturns) to understand what’s happening now. 

To prepare for the economy’s future, we can’t rely solely on the “hard” traditional facts and figures. We need to consider the “soft” subjective metrics, the feelings and interpretations we have in real time. 

Official recession indicators

If you ask most economists to define a recession, they’ll typically refer to prolonged declines in key data points like economic growth, employment and consumer spending. These trends can feed off each other, making the downturn worse. 

Subjective recession indicators matter

GDP and employment are backward-looking figures and don’t always give an accurate picture of the economy. A recession is subjectively determined by the National Bureau of Economic Research and usually made well after the fact, said James Galbraith, economics professor at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin. 

One example: Even though prices aren’t rising as fast as a year ago, and unemployment figures are still pretty low, Trump’s dizzying economic agenda has propelled the most pessimistic consumer outlook since 2011. 

Soft metrics, like how people spend their money and manage their debt, don’t show up right away in the hard data. Yet such subjective indicators — how companies and people feel about the economy — can come to fruition and affect the macroeconomic picture. 

Also, fear and anxiety influence behavior. When the headlines talk about uncertainty, businesses cut back, households buy less, leading to declining retail sales. When family income feels unsteady, loan defaults increase, leading to more economic instability. 

“Our economy runs on people buying stuff and getting services. If that slows down because people have either lost their job or they’re worried about losing their job, it can snowball into materially lower employment,” said Elise Gould, senior economist at the Economic Policy Institute. 

Moreover, some recessionary trends occur in smaller pockets before affecting the broader economy. “Even if we have a mild recession, certain groups of workers are much more likely to be hurt than others,” Gould said. Black workers, for example, consistently experience unemployment rates twice that of white workers, so any downturn will have a magnified impact. “There’s no such thing as a mild recession for marginalized groups,” Gould said.

What the recession memes are telling us  

Not every meme is a metric. A local bagel shop advertising “free water” doesn’t carry much weight in predicting a downturn, but plenty of warning signs show that the economy is already souring. 

We’re spending and consuming differently

When folks have jitters about a recession, they tend to cut back on spending and be cautious with their money. 

➡ People are thinking twice about buying houses. In March, roughly 52,000 home-purchase agreements were canceled, more than 13% of all accepted offers.

➡ Dollar Tree attracts more shoppers across all income groups. The budget retailer’s latest earnings report shows increased traffic and spending compared with last year as more consumers look for cheaper options. 

➡ “Underconsumption core” goes viral. TikTok creators are showing off smaller wardrobes, smarter budgeting and “no-buy” challenges in preparation for tougher times. 

We’re relying on credit for basic goods

Relying on credit to afford everyday necessities points to the high cost of living and the lack of discretionary income.  

➡ 25% of consumers use “buy now, pay later” for groceries. Installment plans are increasingly common to cover food delivery and groceries, not just for financing large purchases. 

➡ More people are falling behind on their credit card bills. The percentage of credit card accounts with payments over 90 days late hit a new peak, indicating signs of consumer distress. 

Companies are cutting costs

Cost-cutting measures, widespread layoffs and fewer job opportunities are signs that companies are focusing on protecting profits, not investing in growth. 

➡ Southwest Airlines is ending its long-standing free checked bag policy. Companies look for ways to save money by cutting perks like this.

➡ United Parcel Service plans to cut 20,000 jobs this year, following 12,000 job cuts last year. UPS CEO Carol Tomé cited the uncertain economic environment as a key factor in the company’s restructuring.

➡ Applications to law school are up 20.5% from last year. Historically, law school is seen as a safe refuge when the economy gets shaky and the job market dries up. 

Planning for an economic downturn 

Dark humor in times of economic stress is always welcome in my book. But there are real, practical steps experts recommend taking before the economy gets worse. 

1. Assess your finances: Review your income, expenses, savings and debts to get a clear picture of your current financial health.
2. Build a financial cushion: Create an emergency fund in case you lose your job, aiming for at least three months of living expenses. 
3. Prepare for job changes: Update your resume, network and learn new skills now to ease potential transitions.
4. Stay invested long-term: Don’t panic and sell investments during market downturns; the market tends to recover.
5. Tackle high-interest debt: Prioritize paying down debts with the highest interest rates (but make sure your emergency fund is established first). 
6. Strengthen your support network: Connect with friends, family and local community resources for potential aid and emotional support.

Recessions don’t have a template  

Every historical recession is unique. Unlike the last two major economic downturns, Gould said a recession in 2025 won’t be the product of a financial crisis or a pandemic but rather the effects of government policies. 

The Trump administration’s slashing of federal funding threatens to severely weaken this country’s fragile social safety net. Cutbacks to popular aid programs like Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, would have particularly devastating effects on low-income families. 

The shrinking of benefits, housing assistance, health services and food aid has a ripple effect, increasing economic hardship across the board as middle-income families have fewer available resources to stabilize. 

Even when a recession officially ends, that doesn’t immediately translate to a recovery for most households. The scars of unemployment, depleted savings and financial insecurity can take months or even years to heal, especially if the downturn is deep and wide. 

“The effects depend, in part, on the speed and scale of government action to stabilize the economy,” Galbraith said. 

Until then, we’ll keep watching social media trends for the bad omens… and the jokes that make us feel better. 

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