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About This Event
This market will resolve to “Yes” if either of the following conditions is met:
1. The seasonally adjusted annualized percent change in quarterly U.S. real GDP from the previous quarter is less than 0.0 for two consecutive quarters between Q2 2025 and Q4 2026 (inclusive), as reported by the Bureau of Economic Analysis (BEA).
2. The National Bureau of Economic Research (NBER) publicly announces that a recession has occurred in the United States, at any point during 2025 or 2026, with the ann
AI-generated analysis based on market data. Not financial advice.
This prediction market addresses whether the United States will experience a recession by the end of 2026. A recession is typically defined as a significant decline in economic activity spread across the economy, lasting more than a few months. The market resolves based on two specific criteria: either two consecutive quarters of negative real GDP growth between Q2 2025 and Q4 2026, as reported by the Bureau of Economic Analysis (BEA), or an official recession declaration by the National Bureau of Economic Research (NBER) during 2025 or 2026. This timeframe follows a period of sustained economic growth after the brief but severe COVID-19 recession of 2020, marked by aggressive monetary policy tightening by the Federal Reserve to combat high inflation. Interest in this topic stems from concerns about the sustainability of the current economic expansion, the lagged effects of interest rate hikes, persistent inflation, and potential external shocks. Economists, policymakers, investors, and businesses are closely monitoring leading indicators such as employment data, consumer spending, and corporate profits to gauge recession risks.
Historical Context
The U.S. economy has experienced 13 recessions since World War II, with the average economic expansion lasting about 58 months. The most recent recession, triggered by the COVID-19 pandemic, lasted only two months from February to April 2020, making it the shortest on record but also one of the deepest. The subsequent recovery was historically rapid, fueled by unprecedented fiscal stimulus and accommodative monetary policy. This period was followed by the highest inflation in 40 years, peaking at 9.1% year-over-year in June 2022, which prompted the Federal Reserve's aggressive interest rate hikes. Historically, such tightening cycles have often preceded recessions. For example, the Fed's rate hikes in the late 1970s and early 1980s were followed by severe recessions. The period from 2009 to 2020 marked the longest recorded economic expansion in U.S. history at 128 months, demonstrating that expansions can endure for extended periods under certain conditions. The current expansion, which began in April 2020, entered its fifth year in 2024, leading to debates about its longevity given historical patterns and current headwinds.
Why It Matters
The occurrence of a recession would have profound consequences for millions of Americans and the global economy. Economically, it typically leads to job losses, reduced household income, declining corporate profits, and increased business bankruptcies. The unemployment rate, which was at 3.9% in April 2024, could rise significantly, reversing gains made since the pandemic. Politically, a recession in 2025 or 2026 would dramatically impact the 2024 and 2026 election cycles, influencing debates over economic policy and potentially shifting control of Congress and the White House. Socially, economic downturns exacerbate inequality, strain social safety nets, and can lead to increased social unrest. For financial markets, recessions are associated with bear markets in stocks, increased volatility, and stress in credit markets. The Federal Reserve would face difficult decisions about when to cut interest rates to stimulate growth, potentially reigniting inflationary pressures. Globally, a U.S. recession would likely dampen growth in trading partners and emerging markets, given the central role of the U.S. economy.
Current Status
As of May 2024, the U.S. economy continues to expand, but signs of moderation are evident. The first quarter of 2024 saw GDP growth slow to 1.6%, while the labor market remains tight but is showing tentative signs of softening with a slight uptick in the unemployment rate. The Federal Reserve has held interest rates steady since July 2023 but has signaled that rates will need to remain elevated for longer than previously expected to ensure inflation returns to its 2% target. Financial conditions have tightened, and leading economic indicators have been mixed. The consensus among professional forecasters, such as those surveyed by the Wall Street Journal in April 2024, places the probability of a recession within the next 12 months at roughly 33%, down from higher estimates in 2023 but still significant. The focus is now on whether the economy can achieve a 'soft landing' where inflation cools without triggering a significant downturn.
Frequently Asked Questions
What is the difference between the two-quarter GDP rule and an NBER recession?
The two consecutive quarters of negative GDP growth is a common rule-of-thumb definition, but the NBER's Business Cycle Dating Committee uses a broader assessment. The NBER examines depth, diffusion, and duration across multiple indicators like employment, real income, and industrial production. The NBER's declaration is the official determination and can occur without two negative GDP quarters, or a recession can be declared even if GDP data is revised.
How long after a recession starts does the NBER typically announce it?
The NBER's announcements are retrospective. There is often a lag of several months to over a year between the actual start of a recession and the committee's official declaration. For example, the committee did not declare the start of the 2020 recession until June 8, 2020, four months after it had begun and one month after it had likely ended.
Can there be a recession without a large rise in unemployment?
Yes, though it is uncommon. A 'growth recession' or a mild, short-lived downturn might see only a modest increase in unemployment. However, significant and sustained job losses are a hallmark of most recessions. The NBER heavily weighs payroll employment and the unemployment rate in its assessment.
What are the leading indicators that suggest a recession might be coming?
Key leading indicators include an inverted yield curve, sustained declines in the Leading Economic Index (LEI) published by The Conference Board, a sharp drop in consumer confidence, weakening manufacturing surveys like the ISM Purchasing Managers' Index, and a significant slowdown in housing starts and building permits.
How do high interest rates cause a recession?
Higher interest rates make borrowing more expensive for consumers (mortgages, auto loans, credit cards) and businesses (investment loans). This reduces spending on big-ticket items and capital investment, slows hiring, and can depress asset prices like stocks and housing. This collective reduction in economic activity can tip the economy into a contraction.
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Updated Jan 15, 2026
Educational content is AI-generated and sourced from Wikipedia. It should not be considered financial advice.
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