Recession Fears Linger as Economic Signal Flashes Long-Term Warning

Despite a recent shift in sentiment suggesting the U.S. economy might dodge a recession, key forecasting tools are telling a different story.

Fresh data reveals that the Leading Economic Index (LEI)—a composite of predictive indicators closely watched by economists—declined once again in May. This latest drop marks the sixth straight monthly decrease, continuing a pattern that has unfolded across 37 of the past 39 months. Such a prolonged slump hasn’t been seen in decades.

What’s more concerning is the LEI’s annualized six-month trajectory, which now shows a 5% contraction. Historically, similar movements have preceded every American recession since the 1960s. At present, the index is sitting at its lowest point in nine years, down roughly 16% from its peak.

The LEI aggregates a broad range of forward-looking metrics—everything from jobless claims to consumer sentiment and manufacturing activity—making it a powerful predictor of shifts in economic momentum. A steady decline typically signals a cooling economy before the downturn becomes apparent in broader data.

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Even so, broader confidence in the economy has improved. Markets initially braced for a downturn earlier this year after trade tensions under President Trump’s administration pushed sentiment toward pessimism. But recent agreements with major trading partners have tempered those concerns. Investment banks like JPMorgan have cut their recession forecasts, and prediction platforms such as Polymarket now reflect just a 28% chance of a U.S. recession in 2025, down significantly from earlier predictions.

Still, not everyone is convinced by the optimistic tone. Economist Steve Hanke continues to warn of an approaching recession, pegging the odds at 90%. He cites the residual impact of trade policies and a shrinking money supply as silent drivers of a potential second-half contraction next year—regardless of the market’s current optimism.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.