ORLANDO, Fla. – “I do not think the U.S. is currently in a recession.”
“…There is no reason to think the economy is in a recession or is at the edge of one.”
“Are we in a recession? – No, we are not.”
July 2022, March 2024, and February 2025.
Three quotes, three different years, three different moments of economic anxiety. All of these quotes point to one consistent message from one of the most powerful economic voices on the planet, former Fed Chairman Jerome Powell: the U.S. economy has not hit the tipping point of a recession.
But what exactly is that tipping point? Though the Fed Chair is the one whose words will calm (or shake) a nation, the real authority on U.S. recessions is a private, nonpartisan research organization called the National Bureau of Economic Research, or NBER. And here’s the part that rarely makes the headline: by the time the NBER officially declares a recession, the country may have already been in one for months.
Powell served as Chairman of the Fed from February 2018 to May 2026. He’s overseen the nation’s economy through Trump’s first term, a global pandemic, a heated 2020 election, and a return of Donald Trump to the presidency.
Three different years. The same question. The same answer. One north star guiding a nation’s economy spread across three presidential administrations.
So why does it feel like, “Are we in a recession?” is still being asked? Are there economic indicators – outside of what government officials say – that would signal the possibility of a recession?
Funny you should ask…
Economic indicators – outside of what government officials say – that would signal the possibility of a recession
You walked right into that one.
This story isn’t about doom and gloom; it’s not a prediction, and it’s not a declaration. It’s a look at some of the more unconventional ways economists, analysts, and everyday observers have tried to read the economic tea leaves – long before official numbers come in.
Some of these indicators are rooted in real behavioral economics. Others are more folklore than formula. But all of them share one thing in common: they’re based on how regular people actually behave when money gets tight.
And sometimes, that’s more revealing than any government report.
So let’s explore several unofficial indicators of a possible impending recession:
- The Lipstick Effect
When money gets tight, people don’t stop treating themselves – they just downsize the treat.
That’s the idea behind something economists call the Lipstick Effect (or the Lipstick Index), a concept first observed by Estée Lauder chairman Leonard Lauder after the September 11 attacks. Although Lauder’s theory was directly tied to one of the company’s products, in practice, it can be applied to all types of products.
His observation: lipstick sales go up during recessions, not down. Why? Because during hard economic times, a $12 lipstick still feels like a splurge – an affordable one, but a splurge nonetheless. The purchase scratches the itch without breaking the bank.
Economists observed Lauder’s theory during the 2008 financial crisis – and it showed up again during the recent pandemic. The broader idea is that when big indulgences – vacations, new cars, designer handbags – fall off the table, small ones take their place.
So the next time you’re in the cosmetics aisle and the shelves look a little picked over, it might be worth paying attention.
- The Parking Lot Test
While the Lipstick Effect was a nuanced observation by one business leader and has grown into a legitimate economic theory, how about another indicator that has academic research to back it up?
A 2022 study, published in the Journal of Retailing, found that parking lot traffic is a highly relevant metric for predicting retailer performance and signaling trends in consumer traffic. Aside from the peer-reviewed study, economists have long used higher parking lot occupancy as an informal gauge of consumer spending. Cars in the parking lot: customers. No cars in the parking lot: no customers.
That tracks.
It sounds almost too simple, but sometimes the simplest reads are the most honest ones. Think of it this way: before the data catches up, before the quarterly earnings reports come out, or before the economists and analysts officially call anything, regular people are already voting with their car keys. The Parking Lot Test is common sense backed up by data.
- The Lottery Ticket Paradox
Here’s a recession indicator that has a little irony baked right into it. When people get nervous about money, lottery ticket sales tend to go up – not down, up.
The logic isn’t as strange as it sounds: when conventional paths to financial security start to feel out of reach, the long shot starts to look a lot more appealing. It’s hope in a $2 scratch-off. This has shades of the Lipstick Effect (pun intended): lottery tickets from $2 to $10 aren’t so much of a splurge as they are a small bet with the possibility of a big payout.
Researchers have tracked this pattern across multiple downturns – lottery revenues historically climb when unemployment rises and consumer confidence falls. It’s not that people suddenly become reckless with their money – on the contrary: they’re looking for any reason to believe things could turn around.
And hey – somebody has to win, right?
- The Prediction Market Paradox
The Lottery Ticket Paradox has a younger, shinier cousin – and it lives on your smartphone.
Prediction markets like Kalshi and Polymarket are relatively new platforms that let anyone place a bet on real-world outcomes: Will the Fed cut interest rates? Will unemployment hit 5%? Will the U.S. enter a recession?
These aren’t casino games and they’re not true online betting – prediction markets are structured more like financial contracts, regulated by the Commodity Futures Trading Commission (CFTC). But make no mistake: at their core, they’re still a bet.
And people are pouring billions into prediction markets.
In 2025, total trading volume on prediction markets topped $44 billion – nearly all of it split between Kalshi and Polymarket. By April 2026, monthly trading volume had grown from $1.8 billion to $24.2 billion in just one year.
That’s not a trend – that’s a stampede.
Sound familiar? It should because at its core, the same psychological impulse that drives someone to buy a $2 scratch-off during tough economic times is the same impulse driving people to their prediction market apps.
It’s the hope that one small risk could change everything.
The difference is that prediction markets feel smarter. You’re not picking lottery numbers; you’re making an informed prediction about the economy, politics, world, or sporting events. It feels less like gambling and more like analysis. But here’s the catch: research shows that 67% of profits on Polymarket go to just 0.1% of accounts.
Kalshi has acknowledged there are 2.9 unprofitable users for every one profitable user. The people on the other side of your “informed” bet are often professional traders and algorithms making tens of thousands of trades a day.
So yes: the lottery ticket went digital, got dressed up in a suit, and started talking about macroeconomics. The impulse, though? Exactly the same. When people feel “economically anxious”, they reach for a long shot. Whether that’s a scratch-off at a gas station counter or a recession contract on a smartphone app, the psychology behind it hasn’t changed one bit.
The long shot just got a lot more sophisticated – and a lot more convenient. And though it may be too early to be recognized, more money being dumped into prediction markets could be the new 21st century economic indicator of an impending recession.
The recession before the recession
Economic indicators – official or otherwise – are ultimately about one thing: human behavior.
And human behavior during uncertain times follows patterns. People downsize their treats. They stay home instead of spending. They reach for long shots when conventional paths feel out of reach.
Jerome Powell said “no recession” three times over three years. The new Fed Chair will eventually face the same question (they always do). And the answer may well be the same.
The official verdict on a recession is always backward-looking: better understood and easier to recognize in hindsight. It tells you where you’ve been. But these indicators – imperfect as they are – also try to tell you something about where we’re heading.
While economists and officials debate the data, regular people are already voting. With their car keys, with their scratch-offs, with their smartphone apps – and with the lipstick they picked up instead of the vacation they didn’t take.
If you watch what people do when money gets tight, their actions will often tell you what the economists haven’t said yet. Before recessions show up in the data, they often show up in people.