Recent sentiment indicates that Kalshi, a prediction market platform, has raised the odds of a U.S. recession in 2025 to 43% as of early March 2025 from 39% showing a consistent increasing prediction odd. While Kalshi currently indicates a heightened perceived risk of a U.S. recession in 2025, with odds recently climbing to around 40%, these figures should be viewed as speculative and not conclusive. Economic conditions can change rapidly, and such platforms may amplify short-term sentiment rather than provide a reliable long-term forecast. This reflects a sharp uptick from earlier estimates, possibly influenced by recent economic data and policy uncertainty.
The Federal Reserve Bank of New York’s recession probability model, based on the yield spread between 10-year Treasury bonds and three-month bills, estimated a 29% chance of a recession by December 2025 as of early January 2025. This model has historically been a reliable indicator, though its probability has declined from a peak of 70% in mid-2023, indicating a shifting outlook that could now be climbing again toward 39% with new data.
In August 2024, J.P. Morgan raised its recession probability to 35% by the end of 2024 and maintained a 45% chance by the end of 2025. If updated with March 2025 economic signals (e.g., softening labor markets or tariff impacts), a 39% figure could fit within their evolving forecast. Goldman Sachs analysts increased their 2025 recession odds to 25% from 15% in August 2024, citing limited risk but acknowledging rising concerns. A jump to 39% could reflect more recent pessimism, though their latest public stance remains lower.
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Bankrate Economist Survey: In January 2025, top economists pegged recession odds at 26% by year-end 2025, a series low. However, this optimism predates potential March 2025 developments, and a climb to 39% could indicate a reaction to newer risks.
Factors Driving the Increase
The unemployment rate rose to 4.2% by late 2024, with job growth slowing to 190,000 per month. If March data shows further deterioration (e.g., unemployment nearing 4.4% or job losses), recession fears would escalate, supporting a 39% probability.
With Trump’s inauguration in January 2025, proposed tariffs (e.g., 10-20% on all imports, 60% on Chinese goods) and immigration restrictions could disrupt trade and raise inflation. The Atlanta Fed’s GDPNow estimate reportedly dropped from a projected 2-3% growth for 2025 to a Q1 decline of 2.8% by early March, per X posts, reflecting tariff-related pessimism.
Consumer Sentiment: The University of Michigan’s Consumer Sentiment Index fell 10% in February 2025, signaling caution that could curb spending, a key driver of GDP. This aligns with a potential uptick in recession odds.
Yield Curve and Fed Policy: The yield curve, previously inverted, normalized by late 2024, reducing some recession signals. However, if the Fed cuts rates too slowly (projected at two cuts in 2025) amid rising inflation from tariffs, economic growth could stall, pushing odds toward 39%.
A 39% probability sits between the more optimistic forecasts (e.g., Bankrate’s 26%, Goldman’s 25%) and the higher-end estimates (e.g., J.P. Morgan’s 45%, Kalshi’s 43% with consistent odd seating at 39%). It suggests a growing but not yet dominant concern, likely reflecting perhaps from a financial institution or market model adjusting for Q1 GDP declines or labor market softening. Betting markets like Kalshi, which react quickly to news, could have nudged odds from 23% post-election (November 2024) to 39-43% as tariff and growth fears mounted.
Recession odds fluctuate with new data. In 2023, some predicted near-100% odds for 2024, yet growth hit 3%. A 39% chance means a recession is possible but not certain. It aligns closely with Kalshi’s 43% and could reflect a conservative midpoint. The odds of a U.S. recession climbing to 39% in 2025 are consistent with a cautious shift in economic outlook. Driven by potential policy shocks (tariffs, immigration), softening fundamentals, and market reactions, this figure suggests heightened risk but not inevitability.
