How worried should you be about the economy?
Plus: How do I know if we’re in a recession? And why should that concern me?
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Is the U.S. economy keeping you up at night? What about your personal finances? If you’re like most Americans, the answer to both questions is likely yes.
The economy is the No. 1 concern of voters, according to nearly every election poll in recent decades. So it makes sense that concern doesn’t just disappear when the election is over, especially in 2025 when household expenses remain high, companies are announcing layoffs and the stock market has been volatile. But job numbers are still good, with U.S. unemployment has gone up slightly to 4.1%, the GDP remains positive, and inflation has cooled.
The Biden administration left the U.S. economy healthy — despite downward trends in other countries — with low inflation and unemployment, and a strong labor market including wage increases for lower income workers.
It’s hard to completely screw that up in just a few months. But Donald Trump’s tariff plan is a big step in the wrong direction, making the stock market go up and down and consumer confidence plummet. I’m not an economist or a stock broker, but my unsolicited advice based on what actual experts are saying is you probably shouldn’t sell your stocks or put your savings under the mattress just yet. And you should also keep paying attention to those experts.
In the meantime, here’s a quick primer on the economy.
You may be wondering if we are headed toward a recession, which is defined as at least two consecutive months of economic retraction. This is measured by tracking GDP (gross domestic product), which measures the value of all completed goods and services during a specific period. The measurement is a snapshot of how the economy is doing, but is not the only measurement that economists value.
Other indicators they’re watching:
– Spending by households, businesses and the government.
– Exports minus imports.
– Wage trends.
– Employment.
– Inflation.
– Consumer confidence.
– The cost of living.
The National Bureau of Economic Research determines if the economy is in a recession. They look for sustained and widespread evidence of a downturn. The latest recession was in 2007-2009 and referred to as The Great Recession.
The stock market’s ups and downs since Trump started tariff wars with our neighbors is one important area of concern this year – the S&P 500 is down 2.6% since inauguration day – but not the only thing to look at.
Even the president says he thinks a recession is possible. “I hate to predict things like that,” he told Fox News when asked about the possibility of a recession. “There is a period of transition, because what we’re doing is very big.”
On March 19, Federal Reserve Chair Jerome Powell said the chance of the U.S. going into a recession has increased since the beginning of the year but is still not highly likely. In the meantime, the Federal Reserve is holding the line on interest rates, neither raising or lowering them over the past two months.
Of course, talking about the possibility of a recession is not the same thing as being in the midst of one.
Nerd Wallet, a consumer economics website, ticked through all the indicators recently. One thing that caught my attention – because I’m a follower of consumer confidence polls – was another negative sign, The Conference Board’s consumer confidence index was down in December, January, February and March.
CBS News interviewed U.S. Commerce Secretary Howard Lutnick, a week or so ago and he seemed open to the possibility of a recession on the horizon. He explained that Trump’s economic policies are “worth it” even if they lead to a recession.
How does a recession affect people?
Would a recession be “worth it” to regular people?
Layoffs have already started. The employment market – for both getting a job and keeping one – would be tougher for many during a recession.
Small businesses would likely suffer as people tend to slow their spending during a recession or when they lose “consumer confidence.” This would likely lead to more unemployment and fewer job openings.
People who have mortgages and can’t afford to make their payments could face foreclosures during an economic downturn. This could affect them many years into the future.
Tax collections in the eight states that depend a lot on sales tax – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – would face state budget challenges that could affect a variety of state programs that people depend on, from schools to housing.
But if employment drops, the states that do have an income tax will also need to rebalance their budgets.
Recessions make inequality starker, because low-income people are more likely to lose their jobs, see their wages decrease and debt increase.
And those are just the financial impacts. Economic stress can lead to health problems, substance abuse, etc. I’ll stop there because this post is depressing me so I assume it is depressing you as well.
Go deeper: Keep reading
Analysis of the Biden economy: from The Center for American Progress:
https://www.americanprogress.org/article/the-biden-administration-handed-over-a-strong-economy/
Nerd Wallet goes through all the economic indicators:
https://www.nerdwallet.com/article/finance/are-we-in-a-recession
Go really deep at the National Bureau of Economic Research:
https://www.nber.org/
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