Recession fears have risen in recent weeks, helped along by a rocky stock market and uncertainty about the impact of tariffs. But the economy still appears solid on most measures. Its job gains have been healthy, unemployment low and inflation relatively stable. And although stocks often fluctuate, sharp, temporary drops usually don’t damage the economy.
Nonetheless, the economy is vulnerable to unexpected shocks such as wars or pandemics. And even if the economy doesn’t slump into a recession, jitters can lead to economic uncertainty and a slower growth trajectory. And that can make people more cautious about spending, a potentially negative feedback loop.
While many economists think the chances of a recession are low, it’s impossible to rule out the possibility completely. Some early warning signals are pointing to a slowdown, including the aging of the labor force, a jump in foreclosures and other signs of distress. But other indicators, such as business and consumer inquiries about bankruptcy, aren’t flashing recession alarms.
Moody’s Analytics chief economist Mark Zandi is one of the more pessimistic, with a 60% chance of the US economy slowing down this year and possibly going into a recession. But he says that the Trump administration’s recent dialing down of some threatened tariffs reduces the risk of such an outcome. And he believes the economy would rebound if it did.
