(Kitco News) - The Federal Reserve may be holding rates steady, but according to Danielle DiMartino Booth, CEO of QI Research and former Fed advisor, the recession has already arrived – and it’s hitting the private sector hard.
In an interview with Kitco News, DiMartino Booth said that job losses, credit tightening, and collapsing consumer demand are already reshaping the economy. She argued that while the mainstream media focuses on inflation and "soft landing" hopes, the economic fundamentals show that the downturn is well underway.
"My take is that by the time you start to hear the sell side come out and make these recession predictions, historically, we’re already in one," she said. "We’ve seen a continued string of downward revisions to payrolls throughout 2024. Job losses began last year, and they haven’t stopped."
Private sector layoffs and confidence collapse
DiMartino Booth pointed to a sharp reversal in CEO sentiment and employment trends in early 2025. "We had a burst of optimism after the election in December," she said, "but the reversals we’re seeing now in March are unprecedented."
She cited Challenger, Gray & Christmas, Inc. layoff data showing 172,000 cuts in February alone, most of which were in the private sector. "Full-time private-sector employment peaked in April 2022," she added.
The real impact, she said, is now being felt on Main Street: "Americans are already changing their lifestyles – cutting back on dining out, skipping vacations. These are signs that consumers are being forced into new patterns."
She also noted that 66% of Americans expect higher unemployment in the next 12 months, according to the University of Michigan – a level that historically has only occurred during recessions.
Consumers under pressure as credit tightens
As of March 25, 2025, U.S. households are showing increased signs of financial strain, according to the Federal Reserve Bank of New York. Its most recent Survey of Consumer Expectations shows that the mortgage refinance rejection rate rose to 25.6% in the fourth quarter of 2024, the highest level since the survey began in 2013. The same survey also reported a sharp rise in application denials for credit cards, auto loans, and home mortgages.
"People are over-levered, and lenders are pulling back. That’s the start of a credit crunch," DiMartino Booth said.
DiMartino Booth also cited the March 2025 bankruptcy of Sherwood Foods, which resulted in 1,500 layoffs, as evidence of the widening economic pain. "When Americans start trading down on food, cutting essential spending – that’s not cyclical. That’s structural stress," she said.
The Fed is behind the curve again
DiMartino Booth criticized Federal Reserve Chair Jerome Powell’s latest assessment that recession risks remain "low to moderate." She argued that the Fed is relying on backward-looking indicators while ignoring mounting forward-looking risks such as credit tightening, margin compression, and job cuts.
"There’s a great big divide between prices paid and prices received – that is a manifestation of a margin squeeze, not inflation," she said.
According to the Cleveland Fed’s March 2025 business inflation expectations survey, CEO price expectations for the next 12 months have dropped to 3.2%, the lowest since 2021. Mentions of "inflation" on earnings calls have declined below 2019 levels, according to FactSet.
"Companies can’t pass on higher costs anymore. That’s disinflationary, not inflationary. The Fed is misreading the signals," she said.
She also pointed to the Fed’s $77.6 billion operating loss in 2024, as reported in the Federal Reserve’s annual financial statements, driven largely by elevated interest expenses to banks on reserves and reverse repos.
"This policy of paying interest on excess reserves dates back to the financial crisis. It’s time to rethink whether that’s appropriate now," she said.
Gold is sending a message
Gold’s breakout above $3,000 per ounce in March 2025 is not just a response to geopolitical risk, DiMartino Booth argued, but also a reflection of deepening market skepticism toward fiat currencies and central bank credibility.
"Gold is the ultimate hedge. With uncertainty rising — whether from tariffs, policy errors, or debt – the case for gold only strengthens."
According to the World Gold Council, central bank gold purchases reached a record pace in Q1 2025, while retail demand in Asia has surged amid currency devaluation fears. DiMartino Booth noted that this coordinated movement into gold reflects a global reallocation out of sovereign risk.
"When central banks and private investors agree on one thing – that gold is safer than paper – you better pay attention," she said.
She added that capital flows into precious metals miners and ETF holdings have surged in March, suggesting strong institutional participation in the gold rally.
Watch the Full Interview
From layoffs and credit stress to gold’s historic breakout and the Fed’s policy missteps, Danielle DiMartino Booth lays out a compelling, data-backed case that the U.S. economy has already tipped into recession.