Unemployment remains low, yet layoffs keep making headlines. Inflation has slowed, but groceries still cost more every week. Corporate profits are rising again, but small businesses say they’re struggling to survive. It all feels a bit odd.
Is the U.S. in a recession or not — or is something else going on?
The case for no recession
Many experts — and plenty of policymakers — say the United States has avoided a recession. Gross domestic product is still growing, job creation continues, and consumer spending hasn’t collapsed.
Wall Street’s optimists point to strong corporate results as proof that the economy has stabilized. After several weak years, company earnings are rising again, especially among large public firms. Stock indexes have also recovered much of the ground lost during earlier slowdowns.
To analysts like those at Goldman Sachs, this is evidence of a “soft landing.” Inflation is cooling, profits are improving, and growth is holding steady. The recession, they argue, never happened.
Or the recession is coming
According to Moody’s Analytics chief economist Mark Zandi, 22 U.S. states are already experiencing recession-level conditions. In some regions, unemployment has risen, small businesses are cutting back, and tax revenue is shrinking.
J.P. Morgan research estimates a 40% chance of a national recession in the coming year, citing slowing demand and the lingering impact of high interest rates. Goldman Sachs puts the risk closer to 35%, warning that consumer confidence has weakened even as inflation cools.
These analysts argue that the financial stress many families feel — shrinking savings, rising debt, and tighter borrowing conditions — signals that the downturn has already begun. It just hasn’t hit everywhere yet.
For households feeling the squeeze, even a small side income can help offset higher costs. This company's members take surveys in their free time and collectively earn over $55,000 daily, with barely any effort.
Actually, the recession is rolling
Mike Wilson, Morgan Stanley’s chief equity strategist, explains these apparent contradictions differently. He believes the economy has been in a “rolling recession” for the past three years, starting in the aftermath of the COVID-19 pandemic.
Instead of one large crash, different sectors took turns shrinking while others stayed afloat. Manufacturing slowed first, then housing, then tech, then retail. Each slump overlapped just enough to drag on growth but not enough to pull the entire economy down at once.
That pattern explains the contradictions: why unemployment remained low even as layoffs spread, why some regions felt prosperous while others struggled, and why economic data never fully matched public sentiment.
Wilson argues that by April 2025, most sectors that had been under pressure had begun to stabilize. Since then, corporate earnings have improved sharply. The S&P 500 has posted its fastest profit growth since 2021, and leaner cost structures have left businesses better positioned for modest but steady gains.
He calls what’s happening now a “rolling recovery,” where improvement moves gradually from one part of the economy to another.
What this means for workers
For workers, that kind of recovery doesn’t feel like a boom. Companies are still hesitant to hire or raise wages, even with stronger balance sheets. Efficiency is the word of the year — businesses want to do more with the same number of people.
The result is a job market that looks good on paper but feels less secure in reality. Pay growth has slowed, and many employees are staying put rather than risking a move. Gen Z workers are hit hardest, facing unemployment rates roughly double the national average and fewer entry-level openings than in past recoveries.
Still, stability is better than the alternative. Fewer layoffs and steady hours suggest the adjustment period may finally be over — even if it doesn’t yet feel like progress.
What this means for investors
Investors are finding reasons for optimism. Corporate earnings “beat” rates are running twice their historical average, and company guidance for 2026 has turned more positive. Many firms have trimmed excess costs and can now turn even small revenue gains into larger profits.
That’s part of why stocks have rebounded so strongly this year. Markets are betting that a slow, steady recovery is underway, even if the pace varies by sector.
But there’s still risk. A spike in energy costs, a resurgence of trade tensions, or prolonged high interest rates could all stall momentum. Investors are being urged to stay diversified and avoid chasing quick gains while the recovery remains uneven.
For those with larger nest eggs, expert guidance can make a real difference in uncertain markets. If you’ve got more than $100,000 in savings, SmartAsset offers a free service that matches you with a vetted fiduciary advisor in less than five minutes.
Just roll with it
The disagreement among experts isn’t a sign that anyone’s wrong — it’s a reflection of how this economy works now. Growth and contraction are happening at the same time across different parts of the country and industries.
That’s why the national picture looks confusing. For some people, the hard part is over. For others, it’s just starting. The recession isn’t coming or gone — it’s been rolling all along, reshaping the economy one step at a time.
Add a Comment