I don't know about whether or nor our smartphones are recording us. I usually hate wearing my smartphone in my pockets and I don't keep my smartphone turned on for very long periods of time. You can do an experiment to prove your theory. Talk about something in front of your smartphone and then do a Google search(or Bing search) about the thing you talked about.
It's true that it's likely not wise to "trust" your smartphone but I don't think we can jump into the conclusion that devices are actively listening on us at all times. It is definitely possible but I can see it more likely to be targeted and not used on the masses because of the inherent risks for the party doing it incase it's revealed.
What I personally think is that people underestimate the vast amount of information that can be inferred by what you and your friends/family do online. Just by browsing something, the advertisers can infer another, seemingly unrelated thing about it. That's more likely how these suggestions come to be. You also need to understand that it's not just your personal activity online. If someone you know has let a social media platform access to their contacts, that means you will be easily connected to that person too.
There's so much information that can be gathered and inferred indirectly without the need for spying directly. The problem is that a lot of the "spying" is perfectly legal.