--- title: "U.S. Recession Probability Drops Below 20%" type: "News" locale: "en" url: "https://longbridge.com/en/news/269072392.md" description: "The probability of a U.S. recession between Dec 2025 and Dec 2026 has dropped below 20%, the lowest since tracking began in Dec 2022. This forecast uses Jonathan Wright's method, incorporating U.S. Treasury yield spreads and Federal Funds Rate. Recent rate cuts have influenced this probability. Despite the drop, elevated recession probabilities were predicted over the past years, indicating long-term economic weakness. The series ends as the yield curve is no longer inverted and recession probability is below 20%." datetime: "2025-12-09T10:45:49.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/269072392.md) - [en](https://longbridge.com/en/news/269072392.md) - [zh-HK](https://longbridge.com/zh-HK/news/269072392.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/269072392.md) | [繁體中文](https://longbridge.com/zh-HK/news/269072392.md) # U.S. Recession Probability Drops Below 20% The probability that the National Bureau of Economic Research will someday determine a national recession began in the U.S. between December 2025 and December 2026 has fallen below twenty percent. That is the lowest probability returned by a recession forecasting method that we've been following since December 2022, which we started tracking after the U.S. Treasury yield curve inverted in October 2022. This method was developed by Jonathan Wright while working for the Federal Reserve Board back in 2006. It incorporates the one-quarter averages of the spread between the 10-Year and 3-Month constant maturity U.S. Treasuries and the level of the Federal Funds Rate to anticipate, within a 12-month period from an observation date, what the probability the U.S. economy will be in a period of contraction according to criteria used by the NBER. The reason we're following it is because it often takes the NBER months to get around to making that determination after a recession has started. And since a yield curve inversion, when the yield of a 3-Month Treasury is higher than the yield of 10-Year Treasury, is often a harbinger of recession, using a recession forecasting method built using historic data that incorporates it can be useful. The current recession probability level has been achieved following the two reductions in the Federal Funds Rate the Fed has made in the last three months. These cuts have lowered this base interest rate to a target range of 3.75-4.00%. Investors expect the Fed will act again on Wednesday, 10 December 2025 to lower it by another quarter percent to a target range of 3.50-3.75%, the lowest it has been since October 2022. The following update to the Recession Probability Track shows how the probability of recession has evolved from 20 January 2021 through 8 December 2025 in the context of how the difference between the yields of the 10-year and 3-month U.S. Treasuries combined with the level of the Federal Funds Rate have changed over this time. Because Wright's method looks to see whether any of the next twelve months into the future will contain a month the NBER will determine marks the peak of a business cycle, or rather Month 0 of a period of economic contraction, having the latest recession probability falling below the 20% threshold doesn't mean the U.S. economy is out of the woods. We've summarized what periods Wright's method has indicated since we've been tracking it for this series is most likely to include that Month 0: 50% Probability of Recession - 13 February 2023 through 29 November 2025 60% Probability of Recession - 25 April 2023 through 29 October 2025 70% Probability of Recession - 25 May 2023 through 8 October 2024 - 31 January 2024 through 29 March 2025 - 5 September 2024 through 20 September 2025 These are the periods the recession forecasting method predicts the National Bureau of Economic Research will someday identify as containing the month in which a period of economic contraction began. The three sets of dates that apply for a 70% or greater probability of recession relate to a "triple-top" series of peaks the model has recorded since mid-2023. The end of the first period at this greatly elevated recession probability coincides with when the U.S. Federal Reserve initiated a new series of interest rate cuts that took place between September and December 2024 to forestall a recession from starting in the U.S. during the 2024 election season. The first two periods coincide with a period of anemic job growth in the U.S. economy, which is confirmed by Bureau of Labor Statistics data that has undergone two massive downward revisions, confirming the labor market was far weaker than initially reported. The third period coincides with the timing for when the Federal Reserve resumed cutting U.S. interest rates to address a slowing economy in September 2025. The most important thing to take away from this retrospective analysis is that the recession model's forecasts for these elevated recession probabilities were set more than a year ago. Today's economic weakness has been baked in for a very long time. ### **Analyst's Notes** This is the end of the road for our series! Both our criteria for terminating the series have now been met: the U.S. Treasury yield curve has not been inverted since September 2025 and the recession probability threshold finally dropped below 20% this month. If you still want to follow recession probability estimates, there are alternate estimates based on different methods that will give you a current estimate. The recession probability we've presented is based on the Federal Reserve Board's yield curve-based recession forecasting model, which factors in the one-quarter average spread between the 10-year and 3-month constant maturity U.S. Treasuries and the corresponding one-quarter average level of the Federal Funds Rate. If you'd like to do that math using the latest data available to anticipate where the Recession Probability Track is heading, we have provided a tool to make it easy to do. * * * _More By This Author:_ S&P 500 Investors Waiting On Fed To Deliver Expected Rate Cut U.S. Total Nonfarm Employment In November 2025 How Big Is The AI Bubble And Is It Really A Bubble? ## Related News & Research - [US Treasury yield extend fall, 10-year yield last down 2.8 bps at 4.293%; two-year yield slips 1.7 bps at 3.786%](https://longbridge.com/en/news/281544605.md) - [3 Monthly Dividend Stocks With High Yields](https://longbridge.com/en/news/281076989.md) - [Mark Cuban reveals 4 investments built to withstand economic downturns](https://longbridge.com/en/news/281056823.md) - [BCA: Global Recession Risk Remains 'Contained'... For Now](https://longbridge.com/en/news/281564263.md) - [US Treasury yields fall as growth risks appear on investors’ radars](https://longbridge.com/en/news/280963300.md)