A recession isn’t inevitable — at least not right now.
Despite economic uncertainty, key indicators such as job growth, consumer spending and inflation trends suggest that the U.S. may still avoid a downturn. However, for middle-class households already feeling financially stretched, financial preparation remains a smart policy.
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Here’s what’s keeping the economy afloat, and what you can do today to stay ready just in case conditions change.
Why a Recession Isn’t a Sure Thing
Although risks remain, recent data and expert insight suggest the U.S. economy may avoid a full-scale recession in the near term.
Job Growth Is Strong
The labor market continues to add jobs across multiple sectors, albeit at a gradually slowing pace. Unemployment ticked up to 4.1% in June, according to Reuters. While this is still low by historical standards, employers added 147,000 jobs.
“Recession probability estimates range from [33% to] 40%, reflecting ongoing risks such as elevated inflation and global headwinds,” said Tracy Shuchart, senior economist at NinjaTrader.
“Although steady consumer income, a projected GDP rebound and continued (if uneven) job growth continue to support the broader outlook.”
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Consumers Are Still Spending
Consumer demand, particularly for services and travel, remains resilient, according to the U.S. Bureau of Economic Analysis (BEA). This spending helps sustain business activity and economic growth, even as other indicators cool.
According to BEA data, steady household income and a strong labor market continue to support overall consumer activity. Essential goods and services, such as groceries, utilities and healthcare, have remained steady, while discretionary spending on categories like travel and dining out remains active.
“Consumer spending has held steady; and GDP is expected to rebound in Q2 2025 after a single quarterly decline,” Shuchart said. “If inflation begins trending back toward the Fed’s 2% target and corporate earnings remain stable, these would further support a soft landing rather than a recession.”
Inflation Is Cooling
After spiking in recent years, inflation is showing signs of slowing. Price increases have moderated since last year, and forecasters expect that trend to continue through 2025.
CPI inflation is expected to average 2.6% in Q3 and 2.5% in Q4, according to the July 2025 Blue Chip Economic Indicators, a monthly survey of top private-sector economists.
The news gives households more breathing room, suggesting that the Federal Reserve may not need to raise interest rates again this year.
Businesses Are Holding Steady
Despite a slight contraction in Q1, most forecasts point to a rebound, and corporate earnings remain stable across several sectors, Barrons reported. While high interest rates and global uncertainty are pressuring some industries, widespread layoffs haven’t materialized, and companies are still hiring, if more cautiously.
“The GDP is holding steady, inflation is cooling and the labor market remains tight,” said Aaron Cirksena, founder and CEO of MDRN Capital. “But high interest rates and lagging consumer sentiment are still dragging on certain sectors, so the risk hasn’t vanished it’s just been delayed.”
How To Prepare Just in Case
Even if a downturn isn’t guaranteed, taking proactive financial steps now can help households stay resilient under any conditions.
Build Emergency Savings
Even small, regular contributions can create a safety net. An emergency fund can cover essential expenses in the event of an income disruption.
“Build or top up your emergency savings,” said Jean-Baptiste Wautier, a private equity CIO and global markets expert. “Ensure you have three to six months of essential expenses in a safe, accessible account, like a high-yield savings account or equivalent. Liquidity is the ultimate buffer in uncertain times.”
Stay the Course With Investments
Long-term investing remains one of the most effective ways to manage risk during economic uncertainty. Financial experts emphasize the importance of diversification, investing in quality assets, and avoiding emotional decisions in response to market fluctuations.
“Stick to a long-term investment plan,” Wautier said. “Avoid the temptation to time the market. Instead, review your portfolio’s risk exposure, diversify and consider quality assets with durable cash flows. Volatility often creates opportunity for long-term investors.”
Cut Risk and Stay Flexible
Financial experts recommend reducing exposure to high-interest debt and unnecessary spending to prepare for potential changes in income. By tightening budgets, staying diversified and avoiding large purchases, individuals can maintain more control in an uncertain economy.
“Avoid big-ticket purchases you can’t afford to ride out if your income changes,” Cirksena said. “Flexibility is your best defense in uncertain times.”
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: 4 Reasons a Recession Isn’t 100% Confirmed
