Planet Money: How Economists (and TikTok) Know If a Recession Is Coming

Released on May 21, 2025 by NPR's Planet Money

Introduction: The Intersection of Social Media and Economic Indicators

In the latest episode of Planet Money, hosts Kenny Malone and Keith Romer delve into the intriguing convergence of social media trends and traditional economic indicators to assess the looming threat of a recession. Tapping into the widespread discourse on platforms like TikTok, the episode examines both the playful and serious methods through which individuals and experts gauge economic downturns.

Social Media's Take on Recession Indicators

Timestamp: 00:33 - 02:32

Kenny Malone and Keith Romer kick off the discussion by highlighting the surge in economic conversations on social media platforms. Keith observes, “It has been an unusual last few months for economics watchers on social media,” (00:33). They humorously explore TikTok's novel recession indicators, such as restaurant menu changes and cultural phenomena:

1. Five Guys' Introductory Combo Meal: TikTok user "Simply Simone" interprets Five Guys launching a value meal as a red flag, signaling economic strain (01:12). Claudia Sahm playfully adds, “Is getting so bad out here” (01:14).

2. Bar Snack Selections: Elisha Berman notes that the presence of inexpensive snacks like wasabi peas at bars could indicate a recession (01:37).

3. Alex Earl's 'Babysitter Bun' at Coachella: Another TikTok trend suggests that a messy hairstyle, dubbed the "babysitter bun," reflects economic hardships, as explained by Elisha Berman (01:58).

These lighthearted indicators serve as a cultural mirror, reflecting public sentiment and economic anxiety through everyday trends.

Traditional Economic Indicators: The SAHM Rule and the Yield Curve

Timestamp: 04:27 - 16:35

Transitioning from memes to metrics, the hosts introduce established economic indicators that economists rely on:

1. The SAHM Rule (Claudia Sahm):

   • Origin: Developed by economist Claudia Sahm in 2019 while at the Federal Reserve, the SAHM (Sahm Rule) is a robust indicator based on unemployment rate changes.
   • Mechanism: It triggers a recession alert when the three-month rolling average of unemployment increases by at least 0.5% compared to the previous 12 months (08:36).
   • Current Status: Sahm confirms, “the SAHM rule says we are not in a recession” (10:29), providing a measure of economic stability despite fluctuating market conditions.

   Notable Quote: Claudia Sahm reflects on the personal impact of her indicator, saying, “My phone blows up at the worst of times” (10:52).

2. The Yield Curve (Menzie Chinn):

   • Definition: The yield curve plots interest rates of U.S. Treasury securities across different maturities. Normally, longer-term rates are higher than short-term ones.
   • Inversion as a Predictor: An inverted yield curve, where short-term rates exceed long-term rates, has historically preceded recessions. Menzie Chinn explains its significance, stating, “It signals a recession” (12:20).
   • Current Analysis: Presently, the yield curve is partially inverted, suggesting a 22% probability of a recession within the next year, which is above the typical 10-15% threshold but not alarmingly high (15:16).

   Notable Quote: Menzie Chinn emphasizes the market's collective intelligence, “the market's better than an individual forecaster” (13:44).

Comprehensive Measures: The Leading Economic Index (LEI)

Timestamp: 16:35 - 23:05

The discussion advances to the Leading Economic Index (LEI), a composite metric by the Conference Board encompassing ten diverse economic indicators:

• Components: Includes new building permits, manufacturing orders, consumer sentiment, S&P 500 performance, yield curve, and unemployment claims (18:56).

• 3D Rule: Justina Jabinska Lamonica introduces the "3D Rule" for LEI:

  • Duration: The length of the index's decline.
  • Depth: The extent of the drop.
  • Diffusion: The number of components experiencing decline (20:40).

  Notable Quote: Justina explains, “It gives us a fuller picture that the weaknesses [are] widespread components” (21:22).

• Current Evaluation: As of April, recent data incorporated reflects economic turbulence from trade tensions, but overall LEI remains stable, not signaling an imminent recession (23:05).

Conclusion: Balancing Meme Culture with Economic Reality

Timestamp: 23:05 - 25:17

Wrapping up, Malone and Romer juxtapose social media's playful recession markers with serious economic indicators. While TikTok trends like the "babysitter bun" offer a cultural lens on economic fears, traditional indicators like the SAHM Rule, yield curve, and LEI provide grounded assessments.

Claudia Sahm humorously reconciles the two worlds, affirming the current non-recession status while encouraging responsible spending, “Please do buy new underwear” (25:04). The episode underscores the importance of understanding both the lighthearted and technical facets of economic forecasting, ultimately guiding listeners to a nuanced comprehension of potential economic shifts.

Final Notable Quote: Keith Romer advises, “But for real men buy new underwear” (25:04), blending economic advice with humor.

Key Takeaways

• Multifaceted Indicators: Recession forecasting employs both traditional metrics and cultural signals, each offering unique insights.
• Current Economic Climate: As of May 2025, established indicators suggest the U.S. economy is stable, with no imminent recession predicted.
• Role of Collective Sentiment: Social media trends, while not scientifically rigorous, reflect societal anxieties and can complement formal economic analyses.

Credits

Produced by James Sneed, edited by Marianne McCune, fact-checked by Sarah McClure, and engineered by Sina Lofredo. Executive Producer Alex Goldmark.

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