The Blubber

President Trump’s tariffs — and the unpredictable way they’ve been implemented — have once again sparked fears that the U.S. economy could be heading toward a downturn. Although the risk of an outright recession has diminished somewhat with the delay of the steepest duties, there are still valid concerns about whether consumers can continue to sustain economic growth.

Since consumer spending makes up more than two-thirds of U.S. economic activity, any major slowdown in household spending could deliver a serious blow.

So far, Americans are still spending, though at a slower pace. In recent months, consumer sentiment has weakened amid worries about elevated prices, a cooling economy, and potential job losses. Shoppers are becoming more selective — cutting back on dining out, traveling less for both leisure and business, and even doing fewer loads of laundry to trim utility costs.

“The economy is extremely vulnerable to any negative shock — and there are a lot of possible shocks out there,” said Mark Zandi, chief economist at Moody’s Analytics.

It remains uncertain whether the current slowdown is simply a side effect of consumers stockpiling before Trump’s trade war fully kicks in, or the early stages of a deeper retreat.

One reason consumers were able to keep spending at high levels in recent years is the stockpile of savings built up during the pandemic — boosted by stimulus checks and a strong stock market. But those reserves are largely depleted now.

“The cushion people had during the pandemic to deal with rising prices is gone,” said Diane Swonk, chief economist at KPMG. She noted that while the wealthiest 10% of Americans — who drive much of the nation’s consumption — are still on solid footing, she’s most concerned about the remaining 90%.

Many of those households are now under mounting financial stress.

Data from the Federal Reserve Bank of New York and research by the St. Louis Fed show that the share of credit card debt that is 90 or more days past due started rising in 2023 and has continued to increase in early 2025. The trend is especially pronounced among lower-income households.

Real-time credit data from Experian indicates this uptick in delinquencies picked up speed in April.

And the pressure isn’t limited to credit cards. Across all types of loans, delinquency rates hit their highest point since 2020 in the first quarter of the year. A big part of that rise comes from student loans, as repayments — paused during the pandemic — have now resumed. This new burden is putting further strain on borrowers who are juggling multiple debts.

Still, the most critical factor in determining consumer behavior is the job market. “If Americans are working, they’ll spend money,” said Eric Winograd, an economist at AllianceBernstein. “And they get that money from their jobs.”

While companies are still hiring and layoffs remain relatively low, the job market is no longer as dynamic as it was during the post-pandemic recovery, which saw record-breaking hiring, fast-rising wages, and fierce competition for workers.

“Nothing gives consumers confidence like a strong labor market — and we’ve lost that momentum,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.

Job openings have dropped, and the gap between available positions and unemployed workers has narrowed, as businesses scale back hiring plans amid slower growth.

At the same time, spending is rising faster than income when adjusted for inflation — a pattern that isn’t sustainable. “Unless incomes start accelerating, consumption will have to slow down,” said Neil Dutta, head of economic research at Renaissance Macro. “And based on what we’re seeing in the labor market, it’s more likely that spending slows.”

Wage growth is no longer strongest in low-wage industries like hospitality and leisure, which saw big gains early in the recovery. Now, the fastest wage increases are concentrated in high-paying sectors — while earnings for lower- and middle-income workers have begun to stagnate.