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There’s an old joke in economics that stock markets have predicted nine out of the past five recessions. The point being that predicting a recession solely based on the stock market is difficult. “They can turn around on a dime. They can turn around in a heartbeat,” said James Angel, a finance professor at Georgetown University. Major stock markets plummeted on April 3 and 4 following President Donald Trump’s announcement of a 10% baseline tariff for imports from all foreign countries and more for others. The markets saw the largest single-day dips since the stock market crash and recession that occurred at the beginning of the COVID-19 pandemic in 2020. The markets continued to swing the following week with some down days ahead of Trump's announcement that he was pausing tariffs on most countries for 90 days, which sent the indexes soaring.The market, in general, is volatile, experts say and isn’t a perfect forecaster.“It's unknown whether that response will turn into a recession; we’ll have to wait and see,” said Dina El Mahdy, an accounting professor at Morgan State University, saying key indicators will have to be evaluated over six months.Day-to-day, it’s a popularity contest driven by expectations for company profit."And when stock prices go down, that's a pretty strong signal people are expecting companies to make less money. Why would they be making less money? Because of a recession," Angel said.But recessions and stock market crashes don’t always go hand-in-hand, however. One example of this is the stock market crashing post-9/11, El Mahdy said. It was a major event that had a negative market response globally.“Any news, global news, local news can end up with one-time shock on the market, but if persistent, if it has a short-term effect, it can actually become a recession," El Mahdy said. Other indicators have pointed to the possibility of a recession. For example, JPMorgan Chase raised its calculated odds of a recession from 40% to 60% after the tariffs were announced.Recessions and depressions are both declines in economic activity. For a recession, the decline is prolonged from around six months to two years, according to El Mahdy, but a depression can last several years. Recessions are officially defined by the National Bureau of Economic Research, a nonprofit that focuses on research and analysis of major economic issues. They have a committee called the Business Cycle Dating Committee, which keeps a record of business cycles.They define a recession as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.” The calculations take into consideration a number of indicators, including:Number of nonfarm employeesEmploymentIndustrial productionReal manufacturing and trade industry salesReal personal incomeReal personal consumption expendituresReal gross domestic productReal gross domestic incomeReal average of GDP and GDIThe NBER says there’s no set rule for how indicators are weighted, but two with the most weight are income and number of nonfarm employees.There have been 34 recessions to date, according to the business cycle data from the NBER. Most recently, this includes the recession from February to April 2020 and before that, the December 2007 to June 2009 Great Recession. The bureau identifies economic peaks and troughs. A peak is the last month of expansion, while a trough is the peak low of the recession. Recession determinations in the past have taken anywhere between four and 21 months, so the committee can assign accurate peak dates.Recessions are cyclical events, but they actually begin at the peak of the economic cycle when economic activity begins to decline.“You really only know that it's really a recession after it's already started and already it's started to get bad. When you see waves of layoffs, when you see the unemployment rate going up,” Angel said. “You don't have to wait for official government statistics to come out and let you know that things aren't as good as they were.”These government statistics include those key data indicators for a recession. While there are many, economists say two of the biggest are gross domestic product and the unemployment rate.Gross domestic product, or GDP, is the total value of goods and services produced by the U.S. This is commonly calculated as “real” GDP, which means it’s adjusted to account for inflation. Many declines in GDP occur during a period of recession.One metric often referred to is that a period of recession occurs when there’s a period of two quarters where gross domestic product, or GDP, declines. But that isn’t always true. The NBER’s calculations don’t use this rule, explaining that most recessions do have two or more quarters where GDP goes down, but not all. Plus, they factor in other indicators.One example of the rule not applying is during the recession from March to November 2001; there were not two back-to-back quarters of real GDP decline.Another major indicator is the unemployment rate. This calculation measures the number of unemployed people as a percentage of the workforce for those 16 and older. The workforce is all people eligible for employment whether employed or unemployed.Unemployment rates are often at their lowest just before a recession period begins. “But when you see the unemployment rate increasing, that's a pretty good sign that we may be in a recession,” Angel said.Other key indicators include consumer price index and consumer confidence. Consumer confidence plays a role in showing if there’s a drop, people might be reducing their economic activity.PHNjcmlwdCB0eXBlPSJ0ZXh0L2phdmFzY3JpcHQiPiFmdW5jdGlvbigpeyJ1c2Ugc3RyaWN0Ijt3aW5kb3cuYWRkRXZlbnRMaXN0ZW5lcigibWVzc2FnZSIsKGZ1bmN0aW9uKGUpe2lmKHZvaWQgMCE9PWUuZGF0YVsiZGF0YXdyYXBwZXItaGVpZ2h0Il0pe3ZhciB0PWRvY3VtZW50LnF1ZXJ5U2VsZWN0b3JBbGwoImlmcmFtZSIpO2Zvcih2YXIgYSBpbiBlLmRhdGFbImRhdGF3cmFwcGVyLWhlaWdodCJdKWZvcih2YXIgcj0wO3I8dC5sZW5ndGg7cisrKXtpZih0W3JdLmNvbnRlbnRXaW5kb3c9PT1lLnNvdXJjZSl0W3JdLnN0eWxlLmhlaWdodD1lLmRhdGFbImRhdGF3cmFwcGVyLWhlaWdodCJdW2FdKyJweCJ9fX0pKX0oKTs8L3NjcmlwdD4=