Recession fears grow as US households and markets turn cautious
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The news: Recession fears in the world’s largest economy are mounting as consumer pessimism deepens and a top Trump economic adviser acknowledged the economy could contract in the first quarter but predicted growth would accelerate once tax cuts take effect.
US stocks are sliding as traders and strategists start to factor in the rising risk of a recession across the three largest North American economies, including the US, amid tariff uncertainty.
The numbers: The New York Fed’s latest survey found 27.4% of households expect their financial situation to be somewhat or much worse off, the highest level in 15 months.
Expectations for unemployment, delinquency and credit access also deteriorated notably.
A Reuters poll of economists across North America found nearly every one of them – 70 of 74 – believe the risk of a recession in their respective economy has increased, citing uncertainty from US tariff policies.
Meanwhile, the Nasdaq 100 fell as much as 3.90% in early afternoon trading, extending its decline to 9.44% for 2025, while the S&P 500, which has given up all of its gains since Trump’s November election, dropped 2.45%.
What they said: White House economic adviser Kevin Hassett pushed back on recession concerns, calling recent economic “blips” temporary effects of Trump’s tariff strategy and “Biden inheritance.”
He did acknowledge, however, the Atlanta Federal Reserve’s GDP Now tracker, which suggests the economy could contract in the first quarter. He described it as a "very temporary phenomenon" due to businesses delaying investment after a major election. He added that tax cuts would boost investment and real wages, and tariff uncertainty should be resolved in April.
"Just be very wary ... of conversations about recession," he said. "What I think that what's going to happen is the first quarter is going to squeak into the positive category, and then the second quarter is going to take off as everybody sees the reality of the tax cuts.”
A day earlier, Trump warned Americans they may feel a "little disturbance" from his trade wars and refused to rule out the possibility of a U.S. recession.
Jonathan Millar, a senior US economist at Barclays in New York said: "Given this is so uncertain and that there are new announcements every hour or so, it's kind of unclear what the environment is going to look like. It's hard to deny the risk of a recession has intensified."
The sources: Federal Reserve Bank of New York , Bloomberg, Reuters
