The likelihood of a recession in the United States appears to be increasing, yet this does not inevitably mean a severe economic downturn is on the horizon. Despite this, financial markets have reacted with volatility, and both consumer and business confidence have been shaken. This uncertainty has been fueled by President Donald Trump’s acknowledgment that he cannot dismiss the possibility of a recession, alongside cabinet members suggesting a “detox period” is necessary. They argue that the administration’s expansive policies—ranging from substantial tariffs to mass deportations and significant reductions in federal employment and spending—may indeed be worthwhile, even if they precipitate a recession.
Research underscores that recessions often have profound negative consequences that can be both enduring and, at times, irreversible for individuals, businesses, and communities. John Harvey, Professor of Economics at Texas Christian University, explained to CNN, “Recessions bring about unemployment, reduced incomes, debt defaults, increased alcohol and drug abuse, and psychological problems.” According to the International Monetary Fund, recessions typically last around a year and involve declines in economic output, consumption, and trade activity, while unemployment surges, housing and equity values decrease, financial markets face turmoil, and inflation slows due to reduced demand.
The repercussions of such a downturn are often disproportionately felt by lower-income individuals, exacerbating existing inequalities, states Elise Gould, Senior Economist at the Economic Policy Institute. “Historically disadvantaged workers are more adversely affected in a weak labor market, facing higher unemployment rates,” she explains. Young people, commonly among the last hired and first fired, are particularly vulnerable during economic slumps.
Hannes Schwandt, a health economist and economic demographer, notes that entering the labor market during a recession can have long-lasting negative effects. His research highlights that those who began their careers during the 1981-1982 recession faced immediate wage reductions and, for non-white workers, this was even more pronounced. These individuals also experienced poorer economic, social, and health outcomes in subsequent decades. Schwandt’s findings indicate decreased long-term earnings, lower marriage rates, higher divorce rates, and increased disability and mortality rates among this cohort.
While some argue that economic fluctuations can have beneficial outcomes for certain individuals or situations, Schwandt emphasizes that this often comes at a significant cost to others. “Some groups bear the brunt of these temporary fluctuations much more permanently,” he asserts. According to Gould, recessions can hinder workers’ earning potential for years. Graduating during an economic downturn can derail career trajectories, particularly for those with substantial student debt.
Laura Natale’s experience serves as a poignant example. She graduated from the University of Portland in 2008, entering a labor market mired in a hiring slump. “I started in a call center earning $13 an hour,” she recalls. “With loan repayments expecting $1,300 monthly, I defaulted.” As the recession deepened, Natale’s loan interest and penalties escalated faster than her career progression. Even now, the effects linger, impacting her financial stability and career development.
The severity of the Great Recession and the subsequent financial crisis meant a prolonged economic recovery. Gould argues that austerity measures during this period hindered the rebound, contrasting with the rapid recovery observed during the pandemic due to alternative approaches. The current administration’s proposed federal cutbacks could undermine safety net programs critical during economic downturns. “With so many living paycheck to paycheck, these cuts are particularly concerning,” Gould warns. “If job requirements are tied to benefits, and unemployment spikes unexpectedly, securing those benefits becomes impossible.”
Harvey cautions that the Trump administration’s austerity strategies could jeopardize both current economic stability and the capacity for recovery. “The focus is on trade and tariffs, but the more alarming aspect is government spending cuts,” he says. “It’s akin to archaic medicine—believing suffering leads to positive outcomes is fallacious. Suffering only begets further suffering.”
The Evolving Landscape
The potential for a recession and the administration’s policies could significantly impact everyday life and community stability. For ordinary citizens, a downturn could mean job loss, reduced income, and increased financial strain. Communities might witness heightened inequality, particularly affecting historically disadvantaged groups. Young people and recent graduates could find it challenging to enter the workforce, facing prolonged career setbacks.
Businesses may encounter decreased consumer spending, leading to further layoffs and cutbacks. Local economies could contract, affecting everything from housing markets to public services. The ripple effects could extend to federal programs and safety nets, reducing support to those most in need.
For policy-makers and industry leaders, this evolving economic context underscores the importance of resilient strategies that can absorb shocks while maintaining growth and stability. It calls for balanced measures that avoid deepening disparities and sustain economic recovery without imposing undue hardship on vulnerable populations.
