US recession 2026 prediction explained: Worries about a possible US recession are growing, as new data and forecasts suggest the economy may be under more pressure than it appears. While Federal Reserve Chair Jerome Powell recently pushed back on concerns about stagflation, economists say risks are rising due to global tensions and signs of weakness in key areas, as per a report.
Why US Recession Fears Rises as Economic Pressure Builds
Several major forecasts have increased their recession odds. Moody’s Analytics now estimates a 48.6% chance of a recession in the next 12 months, as per a CNBC report. Wilmington Trust puts the odds at 45%, EY Parthenon at 40%, and Goldman Sachs at 30%. In a typical year, the risk is closer to 20%, showing how much concerns have increased.
How Iran War and Oil Prices Add to Economic Stress
A major factor behind these concerns is the ongoing war with Iran. Economists note that oil shocks have come before nearly every US recession since the Great Depression, except during the Covid pandemic. Gas prices have already risen by $1.02 per gallon over the past month, a 35% increase, as per AAA.
Economist Mark Zandi warned that “The negative consequences of higher oil prices happen first and fast,” adding, “If oil prices stay kind of where they are through Memorial Day, certainly through the end of the second quarter, that’ll push us into recession,” as quoted by CNBC.
Labor Market Shows Signs of Weakness Explained
The labor market is another area raising concern. The US economy added just 116,000 jobs in all of 2025 and lost 92,000 jobs in February. The unemployment rate has stayed at 4.4%, but that’s largely because layoffs remain limited rather than strong hiring.
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Hiring has also been uneven. Health care added more than 700,000 jobs, but outside that sector, payrolls declined by more than half a million over the past year. Economists Luke Tilley said that, “I think there’s much less inflation risk than [Fed officials] think, and more risk to the labor market to the downside than they stated,” as quoted by CNBC.
Consumer Confidence Weakens Explained
Consumer sentiment is also weakening. A March survey by NerdWallet found that 65% of respondents expect a recession within the next 12 months, up 6 percentage points from the previous month.Some economists say spending has been supported by rising asset prices. Around 20% to 25% of spending growth over the past two years has come from this “wealth effect,” meaning gains in the stock market have helped keep spending strong. If that support fades, growth could slow.
Fed’s Powell Pushes Back on Stagflation Concerns
Powell rejected comparisons to the stagflation of the 1970s, noting that today’s conditions are different. Back then, both unemployment and inflation were much higher. While the current situation is difficult, but he pointed out that, “It’s nothing like what they faced in the 1970s, and .. I reserve stagflation for that, the word, for that period. Maybe that’s just me,” as quoted by CNBC.
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Economic Growth Shows Signs of Slowing
Economic growth is showing signs of slowing. After increasing by just 0.7% in the fourth quarter, growth is tracking at about 2% in the first quarter, according to the Atlanta Fed’s GDPNow estimate.
Economists say the outlook now depends heavily on how global events unfold. While there is still support in the economy, including policy measures and production growth, the combination of war, rising prices, and labor market weakness is making the path forward more uncertain.
FAQs
What are the current recession odds?
Estimates range from 30% to nearly 49% depending on the forecast.
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Why is the Iran war affecting the economy?
It is pushing oil prices higher, which can slow economic growth.