A mismatch between what the U.S. economy has been producing and what it now demands could lead the country into a recession by mid-2025, John P. Hussman, an economist who correctly predicted the 2000 and 2008 stock-market bubbles, has warned.
“Nobody should be surprised if the U.S. economy is in recession by mid-year,” he wrote on X, formerly Twitter, on Tuesday.
Why It Matters
For two years in a row now, economists have been wary of the U.S. economy sliding into a recession. While many feared a downturn in both 2023 and 2024, the country’s real GDP—which measures the nation’s growth—kept beating economists’ expectations.
Despite the resilience of the U.S. economy in the post-pandemic years, the chance of a recession hitting the country hasn’t been completely staved off.
What To Know
According to Hussman, recessions have occurred historically, “when a mismatch emerges between what the economy has been producing and what the economy now demands,” as he wrote in a comment in December, which he shared again on X on Tuesday, adding, “welcome to that mismatch.”
The mismatches which lead to a recession, “can be driven by shifts in consumer preferences, interest-sensitive investment, technology, government spending, credit strains, or crises like the pandemic,” Hussman wrote on X.
“Disruptions triggered by these mismatches take time to resolve, absent massive bailouts and deficit spending,” Hussman said. “My impression is that we may experience more than a bit of a mismatch and disruption in the next few years.”
While the U.S. economy still shows “some surface resilience in various measures,” Hussman said last month, the country’s “structural” GDP growth (demographic labor force growth plus productivity growth) is still estimated at “just 2 percent annually” and some leading measures of economic activity are showing signs of deterioration.
A view of Nasdaq headquarters in Times Square, as Nasdaq fell nearly 4 percent this morning on January 27, 2025, in New York City.
BRYAN R. SMITH/AFP via Getty Images
Last month, Hussman mentioned a decline in civilian employment growth, which had already gone negative on a year-over-year basis then.
Civilian employment is expected to shrink dramatically under Donald Trump‘s presidency. In his first week in office, the Republican president signed an executive order freezing hiring for federal agencies for 90 days, and on Tuesday, his administration offered roughly 2 million federal workers the option to resign now but be paid until the end of September.
Trump’s goal is to reduce the federal workforce and eliminate roles that do not fit his agenda, like those in charge of diversity, equity, and inclusion (DEI) initiatives.
In December, Hussman said that “more evidence” was needed “to expect a recession with confidence.” On Tuesday, he shared an internal memo from the Trump White House budget office saying that federal agencies must temporarily pause all activities related to obligation or disbursement of all federal financial assistance, and other relevant agency activities that may be implicated by the executive orders.
Hussman changed his prediction for a potential recession to mid-2025.
What People Are Saying
Matt Schoeppner, senior economist at U.S. Bank, said in a December report: “It seems likely the economy may avoid a recession in the near term, though we can expect that real Gross Domestic Product (GDP) growth will remain modest over time.”
Yelena Maleyev, senior economist at KPMG LLP, told Bankrate: “A recession is not in our base case. The economy continues to be buoyed by a resilient consumer who has seen wage growth outpace inflation for almost two years.”
Bernard Markstein, president and chief economist at Markstein Advisors, told Bankrate: “The challenges from higher tariffs and, especially, reducing both legal and illegal immigration, along with deportation of immigrants, both documented and undocumented, raise the likelihood of recession. However, I don’t think that there is a significant threat of a recession in 2025.”
What Happens Next
While Hussman warned that a recession might hit the U.S. economy in the coming months, a majority of economists disagree. In Vanguard’s 2025 outlook, Qian Wang, head of the Vanguard Capital Markets Model, stated that the U.S. economy is more likely to face a soft landing this year than a recession.
In this scenario, “inflation could return to trend while growth strengthens amid a productivity-induced ‘soft landing,'” Wang wrote. A recession might hit the country if “a hefty drop-off in demand” slows “both growth and inflation significantly, forcing aggressive Fed rate cuts.”
J.P. Morgan senior markets economist Joe Seydl put the chance of a recession this year at 20 percent based on a thorough analysis of the current market. “Our subjective view is that the chances of a recession are 20 percent, which reflects the possibility of a policy mistake made by the incoming Trump administration with respect to tariffs and the risk its policies could incite a global trade war,” Seydl wrote in an update published on Tuesday.
In an October report, Goldman Sachs said its economists said there was a 15 percent chance of recession in the next 12 months, down from their earlier projection of 20 percent.