Here are 5 Easy Reasons for a Pending Economic Slowdown.
1)Trade Wars
At the top of the list are the current trade wars. Frankly, it is hard to keep up. So far, President Trump has signed about 260 Executive Orders and counting.
In investing, there is a term called Fear of Missing Out. This means investors are buying into the hype and are more concerned with missing the market going up than they are with it going down. The shorthand version is FOMO. However, all investors should be aware of Why You Shouldn’t Chase the Latest Investment Fad.
With trade we now have TOTO. No, we are not talking about the dog in The Wizard of Oz. TOTO here is shorthand for Tariff On, Tariff Off.
I get it that threatening to implement or increase tariffs is an excellent negotiating tool. Having said that, our largest trading partners are our neighbors, Canada, and Mexico. I am not sure they are a ‘partner,’ but China is the next largest country we trade with.
It is difficult for businesses to make any long-weekend long-term plans with this uncertainty. This is problematic. Businesses will defer investing in any projects when uncertainly gets this elevated.
Tariffs will also affect inflation (see below). The prices for goods will go up. Ultimately, consumers will pay these higher costs. Therefore, this will reduce consumption and slow growth.
We are not there yet but, to prepare, here are 6 Easy Steps to Navigate a Recession. Also, keep an eye out for 6 Black Swans Easy to See.
2)Tighter Financial Conditions
Interest rates have tightened without the Federal Reserve Board (Fed) raising interest rates. The last time the Fed raised interest rates was in July 2023. They raised the Fed Funds rate by 0.25% (25 basis points) to their target range of 5.25% – 5.50%. This was their last increase in their post COVID-19 pandemic tightening cycle.
As a consequence, mortgages, car loans and credit card interest rates remain elevated. This can be problematic as consumer spending accounts for about two-thirds of the Gross Domestic Product (GDP).
3)Unemployment
The Fed has a dual mandate. Their primary goals are to have maximum employment and stable prices.
While it varies over time, the Fed generally considers unemployment of 4%-5% to be acceptable as maximum employment. As of February 2026, the unemployment rate stood at 4.3%, in the range of what they consider to be acceptable. 1)
The U.S. Bureau of Labor Statistics (BLS) publishes the unemployment rate. The BLS issues six different unemployment rates monthly. The official rate that the Fed uses is the so-called U-3.
There is another index called the U-6. This index includes discouraged, underemployed, and marginally attached workers. Astute commentators believe this is a more accurate representation of unemployment. As of February 2026:
This rate stood at 7.9%.
The Federal Government currently employs about 2 million employees. This excludes military and employees of the U.S. Postal Service. In recent years federal agencies have offered buyouts. These offers are made at the agency level. There is no consolidated government total as to how many have accepted.
Additionally, so far, about 60,000 federal employees have been dismissed. There have been lawsuits filed, there are sure to be more coming.
It was not long ago when disengaged employees engaged in “quiet quitting.” These folks did not actually quit. They did the absolute minimum amount of work required. However, they still got their check each week via direct deposit. They were sitting on their assets chair and not working. Strike that, they were working. 100% on their personal stuff.
If federal employees are being let go, how much “quiet quitting” do you think employers will allow any Average Joes going forward?
The current administration has also jumped on migration and deportation. Although the Mexican border is still open, illegal crossings the border are down 92% from when President Trump took office again. Additionally, the government has also been deporting criminals.2)
One potential labor challenge is in the agricultural industry and the trades. They both have a long history of having undocumented workers. This means there will be fewer workers in both the agricultural industry and the trades.
The work-from-home model (WFH) is also under strain. The WFH model was an outcome of the COVID-19 pandemic. Employers still needed to get the work done, so they helped employees get set up to WFH.
Now that this version of the pandemic is behind us, employers want their employees back in the office. Employees are pushing back. Historically, the technology industry was the most accommodating with the WFH model.
However, last year, Amazon told employees they need to be in the office at least three days a week. Apple, Google and Meta had already implemented this.
Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co has been vocal also. He has upped the ante by telling employees to be in the office now five days a week, up from three. We will see where all of this goes.
4)Inflation
As mentioned above, the Fed’s dual mandate is maximum employment and stable prices. How they measure stable prices is through inflation. Their preferred measuring tool is the Personal Consumption Expenditures (PCE) Price Index. The Fed has traditionally targeted inflation of 2%. As of February 2026, the PCE was 2.8% compared to February 2025. 3)
The current PCE is down significantly from the COVID-19-induced high rate of 9.1% in June 2022, a 41-year high. The primary tool the Fed used to decrease inflation was by increasing interest rates. They continuously raised interest rates from near 0% to 5.25% – 5.5% at the end of 2023.
While it is good that the rate of inflation is declining, well, stuff is much more expensive now than it was in 2020. Since the beginning of 2020, the cumulative inflation has been 25%. Said differently, a dollar today buys 80% of what it did back then. 4)
Ouch.
The Consumer Price Index (CPI), another measure of inflation, which is heavily influenced by housing or shelter. This accounted for one-third of the inflation. This is not hard to see, is it? In New England, anecdotally the Boston area is the winner. That is, of course, unless you want something on the water.
The Fed often focuses on core PCE, which excludes energy and food prices because they tend to be volatile. I am not sure what it is like for you, but we eat, drive and heat or cool our house. Just saying.
5)Consumer Confidence
The Consumer Confidence Index (CCI), which measures how optimistic or pessimistic consumers are, is issued by The Conference Board. This index increased marginally from 91.0 to 91.8 in March 2026. For historical perspective, the CCI hit a low in April 2020 of 85.7. This was an outcome of the beginning of the COVID-19 pandemic. Conversely, the CCI reached a high in June of 2021 of 128.9 as the economy was beginning to recover from the pandemic.
Back in the day, they had these things called shopping malls. These sprouted up when the Sears Catalog and Green Stamps were getting a little long in the tooth. You would get in your car and drive to the mall. And spend time shopping there.
Then in mid-1994 there was a small start-up company formed in Bellevue; Washington called Cadabra. I am sorry, you might not recognize the name. They had a name change five months later. The new name is:
Amazon.
The rest, as they say, is history. Go online and buy all the stuff you want need.
What helps consumer confidence?
First, working. There is nothing like direct deposit, right?
Second, the idea that you will be able to keep working and getting your direct deposit. You do not want to end up as part of the unemployed folks. Remember:
It is a recession when your neighbor is out of work. It is a depression when you are out of work.
Third, access to credit. Boy, does this help consumer confidence. Oh, and consumer spending.
The total amount of unsecured personal loans (credit cards, student loans and other consumer debt) at the end of 2025 was a record $560 billion. This is up from $110 billion in 2015. 4)
Personal loans do not include mortgages, car loans, credit cards or student loans. However, these four loans dwarf the unsecured personal loans as these loans total about $18 trillion.
Finally, The Joneses. And are they everywhere. They all have the McMansion, fancy cars in the driveway and annual vacations to tropical islands or Europe. How does this help consumer confidence? Easy, a ton of people feel they need to keep up with The Joneses. Therefore, they spend money. Frequently it is money they do not even have. If there is one thing you need to do it to say Goodbye to the Joneses. 3 Practical Steps to Arrive Financially.
The Road Ahead
As Yogi Berra said, “It is tough to make predictions, especially about the future.”
True that.
Action Item
If you need help with the 5 Easy Reasons for a Pending Economic Slowdown, give us a call at (860) 645-1515 or E-Mail Thomas.scanlon@raymondjames.com.
This article was originally published on April 14, 2025, and has been updated.
1) bls.gov – April 3, 2026
2) cbsnews.com – January 20, 2025
3) Federal Reserve Bank – 2015 In Review
4) cnbc.com- December 18, 2025
5) newyorkfed.org – February 2026
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