Recession risks are down, but keep your guard up. Getty Images/Jeffrey Hazelwood/CNET
In April, recession fears surged after President Trump began his chaotic tariff campaign. Forecasts for a severe economic downturn hit 66%, according to Polymarket.
As Trump deferred some of his most aggressive trade proposals, those forecasts leveled out, but the contours of a potential recession are hard to ignore. Growth in the first quarter of 2025? Down. Jobless claims? Sharply higher. Consumer sentiment? That almost hit rock bottom. On top of that, there are whispers of stagflation, a painful mix of high prices and joblessness, which is even worse than a recession.
You won’t see the same cracks reflected in the stock market, which runs on the moves of a few big names on Wall Street. Investors cheer each time tariffs are delayed or a trade deal is hinted at. It's why markets continue to etch new highs when most of us feel like we're walking a tightrope.
Businesses are effectively in a holding pattern, cutting costs and delaying hiring, which adds to the economic unease. Households battling elevated prices and facing job insecurity are tightening their budgets and spending less. Financial uncertainty can become a self-fulfilling prophecy, said Shang Saavedra, founder and CEO of Save My Cents, a personal finance education platform.
Read more: Worse Than a Recession? Trump's Tariffs Risk 'Self-Inflicted' Stagflation
Recessions happen, so be prepared
As tough as they are, recessions are a built-in feature of our economy. Modern capitalism has a historic boom and bust cycle. Since the mid-20th century, the US has experienced a recession roughly once every five to seven years, with an average length of 11 months.
The most recent one hit with the COVID-19 pandemic in March 2020. By April, more than 16 million jobs were lost. Federal policymakers implemented relief and recovery measures to ease hardship and help spur an economic recovery. The pandemic recession was the deepest but also the shortest in the post-World War II era.
Now, after a significant period of growth, many experts believe another economic reset is on the horizon. “It’s never a matter of 'if,' but 'when' the next recession is,” said Saavedra.
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