March 12, 2025 Why the Recession-Mongering Looks Overblown So Far

Alan Tonelson’s blog argues that for an economy that’s likely to suffer a recession soon, much of the data looks surprisingly reassuring.

By Alan Tonelson

The increasing fears that the U.S. economy is headed for a recession due mainly to President Trump’s tariff policies or simply to the uncertainty created by his economic decisions all told (including Elon Musk- spearheaded government spending and payroll cuts) are looking increasingly strange.

Take today’s JOLTS (Job Openings and Labor Force Turnover) report from the Labor Department for January. This monthly survey measures, among other developments, how many employment vacancies businesses say they can fill, and how many workers they’re hiring. The latest results? Private sector job openings hit their second highest level (6.860 million) since last March. That’s still far below the peak (11.105 million in March, 2022). But that nearly three-year old number came at a much earlier stage in the current economic expansion, and it’s been falling steadily since then.

In addition, leaving aside the sudden, sharp pandemic-induced downturn of 2020, just before the last two recessions, the job openings rates (which adjust for the growth of the workforce) were 3.4 (in December, 2007) and 3.7 (in March, 2001). As of this morning, it was 4.8. (See this chart. These data only go back to 2000).

As for hirings in the private sector, January’s 5.016 million amounted to the second straight sequential increase – a short winning streak to be sure, but one that hasn’t happened since March through May of 2023. Again, that’s far below the recent peak of 6.417 million in November, 2021, but that result, too, came much earlier in the current recovery – and was still reflecting the unusually strong rebound from the unusually deep pandemic slump.

The latest official monthly jobs report (for February) didn’t look very recession-y, either. It showed the headline unemployment rate at 4.1 percent. Just before the 2007-2009 Global Financial Crisis and Great Recession, it was five percent. Just before the early 2000s downturn it was 4.3 percent. Just before the 1990 recession it was 5.5 percent. Before the 1981 recession, it was 7.2 percent. Before the 1980 recession it was 6.3 percent. In fact, you’d have to go back to the 1969 recession to find an immediate pre-slump unemployment rate lower (3.9 percent) than it is now. (See this chart.)

Another shot of economic pessimism was delivered March 6 by the Atlanta branch of the Federal Reserve. Every few days, the Atlanta Fed issues a “GDP Now” assessment of economic growth for the current quarter, and it’s taken seriously because it incorporates data other than (and timelier) than the figures put out by the federal government. And its edition five days ago claimed that at that point, the gross domestic product (GDP) was actually shrinking in inflation-adjusted terms at an annual rate of 2.4 percent.

Again, leaving aside the Covid slump of 2020, if that figure holds for the official data we’ll be seeing shortly, it would represent the worst quarter of economic performance since the first three months of 2009 as the Great Recession was ending (when inflation-adjusted GDP sank by 4.5 percent annualized).

But if you look closely at this latest “GDP Now” release, you see that it claims that “real personal consumption expenditures growth and real gross private domestic investment growth increased from 0.0 percent and 2.5 percent, respectively, to 0.4 percent and 4.8 percent” since the previous edition three days earlier (which also showed a slightly larger GDP drop). It’s rightly tough to make the case that the economy is dramatically worsening when personal spending and business investment (which make up the great majority of the GDP calculation) are speeding up.

So what’s the problem? According to the Atlanta Fed, it’s the monthly surge in the trade deficit recorded in January. And that’s completely weird for two reasons. First, as I reported last week, most of that increase stemmed from a boom in imports in a single category – finished metal shapes. Second, and weirdest of all, as virtually every mainstream economist will tell you, a worsening of the nation’s trade balance has no impact on growth. It’s simply an accounting fiction.

Now it’s true that the official means of calculating GDP and its changes views any deterioration in the trade balance (even if it amounts to a decrease in a surplus) as a drag on economic growth. It’s also true that the “GDP Now” forecast only assesses changes in the official GDP and whether its expanding or contracting.

But since the “GDP Now” series is meant to provide useful information to all observers of the economy, both inside and outside of government, does this mean that its authors really do believe in the growth-slowing effects of a worsening trade balance? And if they don’t, why don’t they include in their reports some reference to their skepticism? (For a detailed discussion of these issues, see this post of mine.) 

In a welcome moment of humility, the late Paul Samuelson, a giant in the field of macroeconomics, once cracked that “Economists have predicted nine of the last five recessions.” So far, at least, it looks like they’re erring on the side of pessimism again.

Alan Tonelson, a columnist for Industry Today, is founder of the RealityChek blog (alantonelson.wordpress.com), which covers manufacturing, trade, the economy, and national security. He has written for many leading publications on these subjects and is the author of The Race to the Bottom (Westview Press, 2000).

Copyright, RealityChek, 2025

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