Warning signs of a US economic recession emerge: consumer confidence plunges into distress

Since 2024, the clouds of recession in the U.S. economy have become increasingly evident. According to multiple surveys and market data, consumer confidence is plummeting sharply, unemployment expectations have risen to their highest since 2008, and inflation expectations have hit a 30-year high. Amid this wave, the U.S. recession is becoming a focal point of concern for markets and investors alike.

Consumer Pessimism Reaches Near-Modern Highs

American consumers’ outlook on the economy has turned extremely pessimistic. According to a 2024 survey by Harris Poll, 56% of Americans believe the U.S. is in a recession, and 49% expect the S&P 500 index to decline. However, at that time, U.S. GDP growth was “robust,” and the S&P 500 had risen 12% year-to-date—this stark contrast between perception and reality reflects a serious disconnect in consumer sentiment.

As we enter 2025, this pessimism has deepened. Expectations for household income over the next 12 months have fallen sharply to the lowest level since the global economic lockdown in 2020. The latest polls show that 37% of Americans believe the country is in a recession, 31% are uncertain, and only 32% are optimistic about the current economic situation. This indicates that the psychological expectation of a U.S. recession is widespread.

Even more concerning, about 60% of American consumers recently expect the business environment to worsen over the next 12 months. During the most severe period of the 2008 housing market crash, this indicator was only 42%. This shows that current consumer pessimism has reached a new high in modern history.

Rising Inflation Expectations Worsen Recession Fears

Persistent inflation pressures further exacerbate consumer pessimism. U.S. consumers expect the inflation rate over the next 12 months to rise to 6.0%, the highest since 2023. More notably, long-term inflation expectations are also rising—consumers anticipate an average annual inflation rate of 3.9% over the next 5 to 10 years, a 30-year high.

With the Trump administration implementing large-scale tariffs, economic uncertainty has increased, and inflation expectations have climbed accordingly. The U.S. long-term inflation outlook has officially reached its highest level since 1993. This means consumers expect the economy to experience years of accumulated inflation effects, with purchasing power continuously eroded. Against this backdrop, the perceived risk of a U.S. recession continues to rise.

Market and Institutional Pessimism About Economic Outlook

Consumer pessimism has spilled over into financial markets. Since the Federal Reserve began cutting interest rates in September 2024, the S&P 500 has declined by 2%. Historical data shows that during recessions, when interest rate cuts occur, the S&P 500 typically falls 6% within 6 months and 10% within 12 months.

It’s not just ordinary consumers who are bearish on the economy. According to a recent CNBC survey of Federal Reserve fund managers, strategists, and analysts, institutional investors’ sentiment has also turned notably pessimistic. The probability of a recession has jumped from 23% at the start of the year to 36%, a 56% increase. This indicates that professional investment institutions are increasingly worried about a U.S. recession.

In a recent poll conducted by The Economist and YouGov, investors’ outlook on the economy has become more cautious. The market’s expectation of significant rate cuts is driven by a consensus among investment firms and consumers that the risk of a U.S. recession is rising.

White-Collar Job Losses and Labor Market Pressure

Surprisingly, the impact of the economic slowdown is no longer limited to blue-collar industries. Since May 2023, the U.S. professional and business services sector has reduced 248,000 jobs. Even more concerning, employment in this sector has declined for 17 consecutive months, marking the longest downward cycle since 2008.

This indicates that white-collar jobs are also beginning to be lost, and the labor market is weakening across the board. The rising unemployment expectations and actual job reductions form a negative feedback loop, further deepening consumers’ economic pessimism and creating a vicious cycle.

Rising Safe-Haven Assets, Gold Prices Lead Gains

Driven by rising recession risks, debt crisis concerns, high inflation, and trade uncertainties, gold prices have surged significantly. The rally in traditional safe-haven assets reflects deep market fears about the economic outlook.

Overall, the collapse of consumer confidence, rising unemployment expectations, climbing inflation expectations, and the bearish sentiment among markets and institutional investors all point in the same direction: the risk of a U.S. recession is increasing. The future economic trajectory will be the focus of market attention.