By Emily Russell
Stories about recessions frequently adhere to a boom-to-bust narrative arc. Bubbles form and burst. Markets rise and crash. The economy gets reset roughly every six and a half years.
Real life is less faithful to that neat story line, according to Tyler Goodspeed, a Harvard and Cambridge-trained economic historian and the chief economist of Exxon Mobil. "Recessions are unpredictable," he says.
There is nothing innate to human psychology or inherent in modern economies that indicates recessions are part of an inevitable business cycle, he writes in his new book, Recession. Goodspeed travels back to the 18th century to downturns in the U.S. and the United Kingdom to explain why the common narrative that one seismic shock will flip an economy on its head is wrong.
Rather, recession hawks should keep an eye on compounding jolts that could simultaneously weaken the economy and the labor market, he argues.
Americans are on high alert for signs of a coming recession as oil and gas prices continue to surge during the Iran war. Google searches for "recession odds" have surged 90% in the U.S. this year. Goodspeed notes that recession-related search trends like "layoffs" also spiked in 2008 and 2020 -- just before the U.S. economy entered its most recent recessions.
Goodspeed, who has been helping guide one of the world's largest oil producers through the worst energy crisis in half a century, spoke with Barron's on March 31 about what recession signs to watch this year, and what can be learned from past oil shocks. An edited version of the conversation follows.
Barron's : What are the most pressing economic developments that could lead the U.S. economy into a recession?
Tyler Goodspeed: I tend to look first at what shocks have historically contributed to economic recessions. One of the most prolific contributors to recessions over the past four centuries has been energy price shocks. In the post-war period, that was most commonly oil price shocks. In any given year since 1945, there has been about a one-in-10 chance of an oil-related recessionary supply shock. If you go farther back in time, the culprit was coal. Before coal, it was turf or biomass.
Although we generally think of macroeconomic shocks like we saw in the Covid-19 pandemic as being recessionary, often recession contributors are more sector-specific. We have seen this in steel and in automotives. There are 17 elements on the periodic table on which China threatened to impose export restrictions last year. Those restrictions are currently suspended until October. But they should be considered a nonzero recessionary risk, insofar as sector-specific shocks have been historical contributors.
Many investors and others are worried that a bubble is forming and may burst in artificial intelligence-related stocks and spending. Could this contribute to a recession?
You could see a decline in AI investment because of a recessionary shock elsewhere, whether in energy or something else. But historically asset prices are more likely to be casualties of economic recessions already under way, rather than causes thereof.
If you look at the post-dot-com era, tech stocks had already started to recover by the start of the 2001 recession. Multiple other shocks occurred contemporaneously: 9/11, a run up in energy prices, and the establishment of China's most-favored-nation status -- the consequence of which was an immediate and dramatic decline in net new hiring in U.S. manufacturing and industry.
But whether it is canals, railroads, or fiberoptic cables, investment in physical infrastructure around new technology tends to be remarkably faithful to long-run trends. It resembles a very smooth S-curve [ a trendline showing slow initial growth, followed by rapid upward growth and then a plateau]. Whatever happens in the near term, the physical infrastructure around AI will likely show fidelity to that trend.
How will we know if or when we are teetering on the edge of recession?
The single best indicator of an economy entering a recession is the unemployment rate. Armed only with a graph of the unemployment rate, one could do a pretty good job picking out historical recessions. Recessions are generally characterized, in the first instance, by the substitution of a sudden, sharp, upward movement in the unemployment rate for a gradual downward or sideways movement. That is driven mostly by not a sudden increase in the rate at which firms lay off workers, but a sudden decrease in the rate at which they hire workers. Workers are spending longer spells in unemployment; they are having a more difficult time finding jobs.
A lot of conventional recession indicators or prediction tools aren't really able to predict recessions. That said, I don't believe in astrology, but I still take a peek at my horoscope every now and then. The yield curve and other indicators can't really predict recessions, but I'll still take a look at them.
What lessons from earlier oil shocks are relevant as oil and gas prices rise today?
It takes a lot to push a large, diversified economy into a period of outright contraction that spreads across sectors and involves net employment losses. Whether you are thinking about the energy shocks of the 1970s or the coal shocks of the early 19th century, one typically observed a confluence of coincident shocks.
When I look back on the energy shocks of the 1970s, there are certainly similarities to now in terms of the physical disruption to barrels of oil and cubic feet of gas. But there are also differences: Core OPEC supply is a smaller share of global supply than in the 1970s. Non-OPEC supply is more elastic. A dollar of output is less energy-intensive generally and less oil-intensive specifically. We also learned a lot of lessons in the 1970s and therefore now maintain strategic petroleum reserves that can provide a near-term buffer.
What should the Federal Reserve do in response to the current volatility in the oil market?
It is a tough question. On the one hand, we are taught as economists to look through supply shocks that are expected to be temporary over some time horizon, in part because monetary policy operates with lags. On the other hand, insofar as inflation expectations can reset higher in response to commodity price shocks, the Fed might need to engage in tightening that they would otherwise look to avoid.
The literature shows that one of the channels through which energy price shocks, like other commodity price shocks, can impact the economy is the central bank. It is more likely to tighten in the face of that shock.
Many things in our economy and in the financial system are changing right now. Is there any case for optimism?
There is a good case for optimism. Recessions have become rarer as we learn how to better absorb the shocks that historically would have contributed to recessions. Economic expansions have been living longer. That is a positive sign.
What is most helpful to sustaining those expansionary periods now and in the future?
Policymakers and private-sector actors should caution themselves against hubris. There are examples in history when contractionary monetary and fiscal policy exacerbated recessions already under way. The classic example is the Great Depression.
Policymakers should try to avoid overmedicating or sedating economic expansions. There has never been an immortal economic expansion. Recessions will continue to happen because history will continue to happen.
Thanks, Tyler.
Write to Emily Russell at emily.russell@barrons.com
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April 03, 2026 01:30 ET (05:30 GMT)
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