For months, economists and investors have debated whether the U.S. economy was heading toward a recession—or already in one. But according to one of Wall Street’s top analysts, the truth may be more surprising: Corporate America’s private-sector recession is already over.
After three turbulent years of contraction across major industries, the private economy—spanning manufacturing, real estate, and parts of tech—appears to have quietly bottomed out this past spring. The rebound, experts say, may not yet be visible in headline GDP numbers or consumer sentiment, but it’s showing up in corporate earnings, hiring patterns, and capital spending.
This isn’t the kind of recession most Americans think of—a broad collapse across all sectors—but rather a prolonged, rolling downturn that hit different corners of the private economy at different times.
And now, signs suggest it has finally ended.
A Three-Year Private-Sector Slump
The analysis, widely circulated in financial circles, comes from Ed Yardeni, a veteran market strategist known for calling economic inflection points before they appear in official data. Yardeni argues that “much of the private economy” experienced a three-year recession from mid-2021 through April 2024—marked by shrinking profits, layoffs in cyclical sectors, and stagnant capital investment.
“If you strip out government spending and the resilience of the consumer, the private economy was in a long, drawn-out recession,” Yardeni explained in a recent note. “The good news is that it seems to have ended around April of this year.”
During that period, corporate profit margins declined from pandemic-era highs, capital expenditure (capex) dropped in real terms, and industries such as real estate, transportation, and manufacturing all reported multi-quarter slowdowns.
Even as the headline GDP continued to grow—propped up by government infrastructure spending and stimulus-related demand—many companies felt squeezed by rising interest rates, high input costs, and softening demand.
In short: the economy that consumers saw in the headlines wasn’t the one corporate leaders were living through.
Corporate Earnings Tell the Story
The turning point, Yardeni says, became clear when corporate earnings began to stabilize and rebound in early 2024.
After nearly two years of declining profits, earnings reports across multiple sectors began to show a consistent pattern: cost-cutting was working, margins were recovering, and balance sheets were healthier.
According to FactSet data, S&P 500 companies saw a 7% year-over-year earnings increase in the second quarter of 2024, marking the fastest growth since 2021.
“Corporate America has quietly healed itself,” says Yardeni. “Companies adapted to higher rates, optimized operations, and deleveraged. It’s not that growth is booming—but the contraction has clearly ended.”
Industries that were early victims of the slowdown are now leading the recovery. Manufacturing output has begun to rise again, tech spending is accelerating thanks to artificial intelligence demand, and even commercial construction—long seen as a weak spot—is stabilizing.
The Public vs. Private Economy Divide
The U.S. economy’s resilience over the past three years has often puzzled observers. Despite aggressive rate hikes from the Federal Reserve, inflation spikes, and tight credit conditions, the economy avoided a full-scale crash.
Yardeni’s theory helps explain why. While the public economy—buoyed by government stimulus, infrastructure projects, and defense spending—remained strong, the private economy was undergoing a slow, grinding contraction beneath the surface.
That divergence masked what, for many businesses, felt like a deep recession.
“If you ran a small manufacturing firm or worked in commercial real estate, the last three years were brutal,” says Diane Swonk, chief economist at KPMG. “But if you worked in government contracting or healthcare, you might have barely noticed a slowdown.”
This “K-shaped recovery”—where some sectors thrive while others languish—has defined the post-pandemic era. And while it has created uneven growth, the end of the private-sector slump could bring the two halves of the economy back into alignment.
Labor Market Stability Reinforces the Turnaround
Another indicator supporting Yardeni’s claim: the labor market has remained remarkably strong despite widespread layoffs in tech and finance during 2022–2023.
Job growth in services, healthcare, and construction has more than offset weakness elsewhere. Meanwhile, unemployment has hovered around 4%, a historically low figure even amid tightening monetary policy.
At the same time, wage growth has cooled—reducing inflation pressure—while labor productivity has improved, suggesting companies are operating more efficiently.
“Businesses are hiring again, but more selectively,” says Yardeni. “The layoffs of 2023 were part of a rebalancing. Now, firms are rebuilding teams for the next growth cycle.”
Interest Rates and the Corporate Reset
The Federal Reserve’s rapid rate hikes—raising borrowing costs from near-zero to above 5% in under two years—were a major drag on corporate performance. For smaller firms, the impact was particularly harsh: higher debt servicing costs, tighter bank lending, and slower consumer demand.
But as inflation has cooled, the Fed has signaled its readiness to ease policy in 2025. That shift, combined with corporate deleveraging, has laid the groundwork for a rebound.
Corporate America has adapted to a higher-rate world, prioritizing debt reduction and cash efficiency. According to Bloomberg Intelligence, corporate leverage ratios have fallen to their lowest levels since 2018.
“The Fed’s pain campaign worked—but not in the way most people expected,” says Swonk. “It forced corporate discipline. Now, with rates stabilizing, that discipline is turning into strength.”
The Market’s Verdict: A Recovery Underway
Wall Street appears to agree. U.S. equities have remained resilient through bouts of volatility, with the S&P 500 up more than 15% year-to-date and corporate bond spreads narrowing significantly.
Earnings optimism is rising again, particularly in cyclical sectors like industrials, technology, and consumer discretionary—often the first to recover from a business-led slowdown.
“Markets are forward-looking, and what they’re seeing now is the return of profit growth,” says Yardeni. “The private recession is over, and the expansion phase has begun.”
Why the Public Doesn’t Feel the Recovery
Despite corporate optimism, many Americans remain skeptical. Consumer sentiment surveys show lingering pessimism about inflation, housing affordability, and job stability.
That disconnect, analysts say, reflects the lag between corporate recovery and household recovery. Companies may have reset their balance sheets, but households are still dealing with high costs for food, rent, and debt.
“The business cycle turned before the human cycle did,” says Swonk. “It takes time for improved productivity and earnings to flow into wages and lower prices.”
Moreover, with political tensions rising ahead of the 2026 midterms and uncertainty over fiscal policy, consumer confidence remains fragile even as the corporate sector strengthens.
What Comes Next
If Yardeni’s analysis holds true, the U.S. could be entering a new phase of moderate, sustainable growth, driven by corporate investment rather than government spending.
Sectors like AI infrastructure, green energy, defense technology, and healthcare innovation are expected to lead the next wave of expansion. Meanwhile, declining inflation and steady employment should give the Fed enough room to gradually lower rates without reigniting price pressures.
“We’re not heading into a boom,” Yardeni cautions. “But the three-year slog is behind us. The private economy has recalibrated—and it’s ready to grow again.”
Conclusion: A Recession Few Noticed, an Expansion Few Expect
The idea that a recession ended in April might seem counterintuitive—after all, the U.S. never officially entered one. Yet, beneath the surface of the public data, Corporate America lived through its own private recession—a period of belt-tightening, layoffs, and restructuring that quietly reshaped the economy’s foundation.
Now, with balance sheets repaired and profits rising, the private sector is poised for renewal. Whether the broader public feels that recovery is the next big question—but for the first time in three years, the signals from Corporate America are pointing upward.
