Are we in a recession? Here are the umpires who make the final call.

Recession fears are rising after first quarter GDP contracted for the first time in three years, but economists caution an official downturn may not be declared for months — or even years.

While two consecutive quarters of negative GDP growth is often treated as a rule of thumb for a recession, it’s not the official definition, and it doesn’t always hold up.

So, who decides?

It’s technically up to the Business Cycle Dating Committee (BCDC), a nongovernmental, nonpartisan entity tasked with identifying recessions. The BCDC operates under the National Bureau of Economic Research (NBER) and comprises a group of prominent economists. Led by Stanford professor and economist Valerie Ramey, the committee bases its determination on a broader set of indicators and only makes the call after reviewing months of backward-looking data.

Like umpires calling a baseball game, the BCDC’s job is to make an official call after the fact. That means we often don’t know we’re in a recession until it’s already underway, or even over.

“The NBER doesn’t predict [recessions], they tell you after the fact,” Michael Darda, chief economist and macro strategist at Roth Capital Partners, told Yahoo Finance. “The NBER is not trying to call a recession in advance. They wait until the data has been revised multiple times and the downturn is obvious.”

So, why does it matter when (or even whether) a recession is officially declared, especially if the call comes long after the pain has passed?

For policymakers, investors, and historians, the timing of the call isn’t just academic. It shapes the interpretation of economic cycles, informs the evaluation of policy decisions, and influences which lessons are carried into future downturns.

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According to the NBER website, a recession is a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

To make that call, the NBER looks at several key indicators: employment, real personal income, industrial production, and real business sales. It also weighs three main criteria — depth, diffusion, and duration — when assessing a downturn.

A particularly sharp drop in just one area can sometimes tip the scales, as it did during the COVID-induced recession of 2020, when a severe and widespread collapse in activity led the committee to declare a recession that lasted only two months.

“It’s not just two down quarters of GDP,” Darda said. “That’s a common misconception of what a recession is.”

Darda cited the 2020 recession as an “unusual” outlier. “It only lasted two months, but the drop was so steep and broad-based that it met the threshold,” he explained. “The unemployment rate shot up from 3.5% to 15% in essentially two months. It was the shortest recession in history but also the deepest. Even during the Great Depression we didn’t fall that much in any particular month.”

On the flip side, 2022 was an example of how relying on GDP alone can be misleading. “We had two down quarters of GDP and a down stock market,” Darda said. “So, everybody thought, ‘We’re in a recession.’ But as it turns out, there was no recession. One of those down GDP quarters was later revised slightly positive.”

Also in 2022, unemployment fell while job growth remained positive: “Right out of the gate, that tells you there’s something wrong with calling a recession,” he said.

For a single indicator, Darda said the unemployment rate may be the most useful. In every recession on record, unemployment has risen by at least 200 basis points. Still, he emphasized that no single metric is definitive. Rather, it’s the broader weight and totality of the data that truly matters.

It’s an important nuance as consensus views can easily become unanchored, especially following sharp stock market declines. Take 2022, for example: Fears of a looming recession surged largely in response to the stock market’s volatile performance, with the S&P 500 (^GSPC) dropping 25% between January and October.

While the stock market is often viewed as a forward-looking indicator, history shows that not every downturn in equities signals an economic recession. Notable declines in 1987, 2011, and late 2018 all occurred without a subsequent recession.

That’s why the NBER does not consider stock market performance in its determinations. It also avoids softer survey-based indicators such as consumer confidence, which recently reflected rising inflation expectations and a more pessimistic labor outlook amid trade-related uncertainties.

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“In periods of disruption, the data can get very noisy,” Claudia Sahm, former Federal Reserve board economist and chief economist at New Century Advisors, told Yahoo Finance.

She pointed to the most recent negative GDP reading as an example, noting, “In all likelihood, GDP is going to snap back in the second quarter because when we look under the hood, it was this front-running of the tariffs to increase imports and spending ahead of time. That demand was borrowed from the future.”

That’s why the NBER prefers to wait before making the official call. But for businesses and policymakers, delaying action until after the fact isn’t realistic. Monitoring a broad set of real-time indicators can help cut through the noise and guide more timely decisions.

That’s where the Sahm Rule comes in. Developed by Claudia Sahm, the rule is a real-time signal that a recession has likely begun, aimed at prompting swift fiscal responses like stimulus checks or enhanced unemployment benefits.

While it’s not meant to forecast downturns, the Sahm Rule helps flag early shifts in the labor market. The rule was briefly triggered in 2022 (and again in 2024), reflecting a modest rise in unemployment, but no recession followed — highlighting both its usefulness as an early warning tool and its limitations amid unusual economic conditions.

Sahm cautioned that recessions are hard to predict and are often driven by unexpected shocks. For now, signs like modest hiring slowdowns and reduced hours suggest a potential downturn may not fully materialize until later in the year as cost pressures from tariffs and delayed layoffs gradually show up in the data.

Read more: The latest news and updates on Trump’s tariffs

Michael Pearce, deputy chief US economist at Oxford Economics, added, “A lot of so-called foolproof recession indicators have broken down in recent years, and I think that points to a very important lesson, which is that we don’t have a very long history of data to work with.”

“Recessions are infrequent and come from different causes, so there doesn’t seem to be any foolproof indicator.” On top of that, Pearce said the structure of the economy has changed. Manufacturing is smaller, services dominate, and that makes typical business cycle signals harder to read. “We’ve said the odds of recession are elevated but less than 50%,” he said. “If it’s a more marginal case — [an economy] bouncing around zero— it’s going to be a lot harder to call a recession in real time.”

We’ll find out for sure when the NBER umpires make the call.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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