The NBER’s Business Cycle Dating Committee defines a recession as “A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”
That means that a recession isn’t a sudden collapse, but more of a slow tightening.
Technically, a recession is a sustained decline in economic activity, but in real life, it shows up differently. People delay purchases, companies freeze hiring, and investments become cautious.
One of the most interesting signals of recession is the lipstick effect. When people feel financially uncertain, they stop buying big luxury items, but still allow themselves small indulgences. Lipstick sells better when confidence drops. It’s not about vanity, it’s about control. Small comforts feel safer than long-term commitments.
Other indicators follow similar logic:
- reduced consumer spending
- layoffs in “growth” industries
- rising interest rates
- shrinking investments
What makes a future recession feel plausible isn’t panic, it’s pattern recognition. High debt levels, geopolitical instability, inflationary pressure, and overstretched markets don’t guarantee a recession, but they make one statistically likely.
Recessions aren’t abnormal failures of capitalism. They’re part of its rhythm. The danger isn’t the recession itself, it’s pretending it can’t happen, and being unprepared when it does.