Recession
A significant, broad decline in economic activity.
Recessions usually bring falling output, rising unemployment, and weaker spending. They are declared with hindsight based on several indicators.
A recession is a broad, sustained fall in activity across output, employment, income and spending, not just a soft quarter in one sector. In the US the call is made after the fact by a committee of economists that dates the peak and trough, often months after the downturn began.
Traders cannot wait for the official call, so they watch leading indicators that tend to turn before the economy does. The yield curve is the most famous: when short-term rates rise above long-term ones, an inversion, a recession has historically tended to follow within a year or two, though the lead time is long and it has given false signals. Jobless claims, manufacturing surveys and credit spreads fill in the picture.