Is a recession on the horizon?

US Economic Outlook: Growth Amid Uncertainty

Key Takeaways

• The US economy is experiencing growth, albeit with some conflicting indicators.

• Corporate earnings are robust, despite a decline in consumer expectations.

• The US tariff policy remains unpredictable, with significant effects from tariff increases yet to be realized.

  
  

Despite indications of a possible deceleration, the US economy continues to progress steadily. In the short term, the economy appears set to continue its growth, as per the Black Investors Coalition Asset Allocation Research Team, which analyzes the economy and business cycle. However, the outlook is still obscured by inflation and uncertainty regarding US policies.

To gain insight into the current state of the economy, review these 8 charts.

Inflation Exceeds Federal Reserve's Target

In July, inflation remained elevated, with prices increasing by 2.7% over the past year, as reported by the latest Consumer Price Index. The core inflation rate, excluding food and energy, rose by 3.1% year-over-year in July. This rate continues to surpass the Federal Reserve's target of 2% for stable inflation. Price increases in July affected sectors such as housing, used cars, and medical care. Upcoming tariffs may further elevate prices in the following months.

The Job Market is Cooling Off

The employment report for July indicates signs of a weakening labor market. Although employers continue to add jobs and the unemployment rate remains low, job gains for May and June have been significantly revised downward. This reveals vulnerabilities in the economy's resilience.

The job market is not the only concern for consumers, as reflected in declining spending and confidence levels. However, while consumer expectations are currently low, this does not typically signal an impending recession. Provided there is no substantial increase in layoffs or jobless claims, which has not occurred thus far, the economy may remain stable.

Adding complexity to the employment landscape are immigration trends. More restrictive immigration policies could constrain the labor supply and potentially exert upward pressure on wages.

Investment Trends in Businesses: A Focus on AI

Large corporations, particularly those in the technology and communications sectors, are making significant investments in artificial intelligence. In contrast, smaller enterprises are exercising caution, largely due to uncertainties surrounding trade policies and tariffs. This uncertainty often leads companies to postpone substantial investments.

Stability in Corporate Profits

While projections for corporate earnings experienced a significant decline earlier this year, they have now stabilized. Investors remain confident that major corporations, which continue to generate robust profits, will maintain their performance by increasing sales and managing costs effectively.

US Policy Remains Uncertain

Considerable uncertainty persists regarding the government's future actions, particularly concerning trade policy. The tariff increases implemented in 2025 have led to the highest US tariff rate since the 1930s. These tariff hikes present a direct risk of stagflation—characterized by high inflation and low growth—for the US economy. Purchasing managers in the manufacturing sector have reported increased price pressures in recent months, which has historically been a precursor to higher consumer inflation.

Preparing for Economic Challenges

Currently, indicators do not suggest an imminent recession. However, it is wise to prepare for potential challenges. You might consider these 6 strategies to recession-proof your life, which are beneficial in both prosperous and challenging times.

Establishing a comprehensive financial plan that considers all scenarios can provide peace of mind. To initiate or enhance your plan, consider consulting with a financial professional.

Conclusion

In summary, the US economy is navigating a complex landscape of growth and uncertainty. While inflation and job market fluctuations pose challenges, corporate earnings remain strong. The unpredictable nature of US policy adds another layer of complexity.

For those looking to stay informed and proactive, understanding these dynamics is crucial. By adopting sound financial strategies, you can better position yourself for whatever the future holds.

Best Regards,

Stock Market Charlie