It would be hard to go through a week in 2025 without hearing talk of recession fears. Investors and economists are warning that the Trump administration’s tariff policies may trigger a economic slowdown.
During a recession, consumer spending decreases compared to a growing economy and companies are less likely to invest in new projects when sales are slipping. If consumer spending falls enough, businesses cut back on hiring and more people will lose their jobs. That can lead to higher unemployment, lower incomes and a general feeling of malaise.
But how do you know if a recession is brewing? A few indicators can give you an early heads-up, like more going-out-of-business liquidations, “for sale” signs lingering longer on homes and spreading homeless encampments. Bankruptcy filings also tend to rise during recessions, though these aren’t the only early-warning signal, either.
Many experts, including Goldman Sachs, believe that a recession is likely. However, other financial institutions have downplayed the risk of a recession in 2025, with JP Morgan reducing its probability of one from 60% to 40%.
Recessions are a normal part of the business cycle, with four phases of growth, peak, contraction (or recession) and trough. The good news is that recessions don’t last forever. But the bad news is that recessions can leave lasting harm on communities and households, especially when they are prolonged. It’s important to keep up-to-date on the current state of the economy so you can prepare for any potential impact on your personal finances.