Recession Talk Is In The Air

It's easy to understand why. Worries that tariffs will spur inflation have sent consumer confidence tumbling. The University of Michigan's Index of Consumer Expectations fell 18% in March from April and 30% from last November.

When consumers' confidence falls, they typically cut back on purchases. That prospect has economists lowering their economic growth forecasts and seeing higher odds of a recession. Analysts cite recession fears as a major cause of the recent stock-market slump.



In all this recession talk there lurks a question most of the commentators take for granted. What is a recession, exactly, and how will we know when we're in one? Economists favor the definition used by the non-partisan National Bureau of Economic Research. A recession, NBER said, is“a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

” Many commentators who aren't economists rely on a simpler (though somewhat misleading) rule of thumb: A recession is two consecutive quarters of declining GDP. For the man on the street, there's Ronald Reagan's famous definition:“Recession is when your neighbor loses his job. Depression is when you lose yours.

” Each of these definitions has problems. The NBER definition may be the official one, but NBER typically calls recessions after they've ended. Those calls are useful for economic researchers, but not to government policymakers responsible for responding to recessions.

The two-quarters definition only looks at one variable, GDP, and over a rigid time frame. A recession could be underway after four months of sharply rising unemployment and steeply falling retail sales. This definition wouldn't capture it.

The Reagan definition is folksy and cute, but obviously one person losing a job does not make a recession. In a dynamic economy with more than 160 million jobholders, many tens of thousands of jobs are lost every day – even during times when the economy is expanding. Yet the Reagan definition does underscore an important point: Politicians are far more sensitive to unemployment than to industrial production, retail sales or the other variables NBER looks at.

Indeed, if unusually large numbers of Americans are losing their jobs and the unemployment rate is soaring, politicians won't care that the pain isn't“spread across the economy” or hasn't gone on for two consecutive quarters. They'll want to do something. By viewing the situation from the individual American's perspective, the Reagan definition also implicitly recognizes that sectors of the economy can be in recession – or feel like they're in recession – even if the economy as a whole isn't.

Take the housing industry. Charts of home sales and pending home sales published recently by Well Fargo economists show sales falling precipitously between 2022 and 2023 to very low levels and bumping along the bottom since. High interest rates deter would-be home buyers and“lock in” owners who have mortgages at the much lower rates available in years past.

They aren't selling even if they want to move because a new mortgage would saddle them with higher monthly payments. And then there's agriculture. From 2022 to 2024, farm income fell sharply .

USDA is forecasting a $41 billion increase in farm income in 2025, but that's thanks to government payments. USDA expects cash receipts to fall another $1.8 billion.

Just as the national economy has many sectors, some of which are doing well and some poorly, so too does the agricultural economy. The definition of an agricultural recession is murky. But if it's defined as a multi-year period of low crop prices, higher costs and paltry farm income, the row crop sector is in recession.

Some other ag sectors are doing somewhat better. Both the ag economy and the national economy are bracing for a trade war. The national economy might grow slower, but avoid a downturn.

Many of the economists who've upped their recession odds still put those odds below 50%. The ag economy is more dependent on exports and therefore more vulnerable to the expected retaliation. Ag exports have been growing slowly in recent years after falling sharply between 2022 and 2023.

Should they take another plunge in a trade war, will government payments increase enough to compensate? If not, we could see an agricultural economy that no one will doubt is in recession. Former longtime Wall Street Journal Asia correspondent and editor Urban Lehner is editor emeritus of DTN/The Progressive Farmer. This article, originally published on April 3 by the latter news organization and now republished by Asia Times with permission, is © Copyright 2025 DTN/The Progressive Farmer.

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