Just a few weeks ago, stock markets were at all-time highs and the R-word (recession) was nowhere in sight. But now, with trade tensions rising and GDP forecasts getting slashed, the fear is resurfacing.
Recessions happen when people become less likely to spend or invest money, and this can impact businesses that rely on consumer spending. This can also cause companies to cut back on hiring and production, resulting in job losses and a slashed economy. This cycle is hard to break, and it has happened many times before — including during the COVID-19 pandemic and in the aftermath of the 2008 financial crisis.
The timing of when a recession will hit is unpredictable, but there are several warning signs. A big one is when consumers are expressing concerns about the business climate, personal finances, inflation and labor markets. The University of Michigan’s latest gauge of consumer confidence dropped in early April, suggesting that worries are rising.
Recessions aren’t always bad, but they can be challenging. The best thing you can do is have a healthy cash cushion, so you can ride out the rough patch without stressing about paying your bills. It’s also a good idea to pay down high-interest debt so you’re not stuck with it during a recession when interest rates may rise. And you should assess your own business to see how resilient it would be in a recession so you can make the appropriate changes.