America’s economy still appears strong on the surface — unemployment is low, consumer spending hasn’t cratered, and the stock market continues to rewrite its record books. But beneath that shiny top line, economists say the foundation is beginning to show cracks. A group of “red-zone indicators” is persistently flashing together now, and history shows us that when this many warnings signal simultaneously, a recession almost always follows.
Some analysts have referred to them as the “seven deadly signs” — not because they are harbingers of doom, but because each one portends a different kind of vulnerability that has been quietly spreading into every corner of American economic life. Together, they paint a picture of an economy that is not falling off a cliff but also appears to be running out of room to keep sprinting.
The first warning is debt. But: Household debt has hit a new peak in inflation-adjusted terms — one not reached even before the housing bubble and other forms of leveraged lending — and credit-card balances have surged to over $1.3 trillion. For economists, it’s not the number that concerns everyone — it’s the rate at which delinquencies have been rising. Americans are increasingly falling behind on payments, particularly young adults and lower-income households. Once the public begins selecting which bills not to pay, spending slows.
Another blinking light is the job market. Yes, unemployment is low. But hiring is slowing, job openings are contracting, and layoffs have been quietly creeping up. Companies are not firing people in droves, but they are freezing roles, slowing hiring, and cutting hours. The heat of the labor market was the reason the economy’s engine kept running — and now it’s much cooler than the headline numbers suggest.
Then there’s manufacturing. The industry has been shrinking for more than a year, and new orders are dropping again. America doesn’t depend on factories the way it used to, but manufacturing slowdowns nearly always register before a broader slowdown reaches services and consumer demand. It’s the part of the economy that reacts first — and, in current circumstances, it’s reacting badly.
Small businesses are feeling the strain as well. These days, surveys say confidence is plunging, borrowing is getting more difficult and expensive, and owners tell us they are being squeezed by the cost of hiring, insurance, and rent. When small businesses begin to cut back, that eventually puts pressure on local job markets and local spending.
Housing is another pressure point. Mortgage rates are still high, construction is cooling, and existing home sales are stuck at near multi-decade lows. With affordability at its least healthy level on record, younger buyers are frozen out, move-up buyers are stuck, and sellers aren’t moving. A market that ceases to work does not collapse the economy; it starves it — so much economic activity is bound up in purchasing and moving.
Corporate profits are also flattening. Not crashing, but no longer growing at a pace that justifies high valuations and aggressive expansion. The companies are still making money, but rising costs and diminishing pricing power have been squeezing margins. Stagnant profits mean investment slows — and that ripple eventually affects hiring, wages, and purchasing.
And everything is shadowed by the ultimate caution: consumer fatigue. Americans are still spending, but they are doing so more tentatively and relying on credit. Many households are trading down to cheaper brands or forgoing purchases altogether. The spending enthusiasm that fueled the post-pandemic boom isn’t dead, but it is ebbing.
Take them together, and these seven signals don’t necessarily mean a recession is coming — but they make the case for one far more plausible. Economists note that the US doesn’t require all seven chimneys to start firing simultaneously to slide into a downturn. Three or four will usually do, historically. Right now, they are all moving.
There’s still room for optimism. The economy has been confounding predictions for the past two years. Inflation has cooled, wage growth is steady, and the country has demonstrated that it can take a punch. A crash landing is not inevitable. But it would be naïve to think there were no warning signs.
The question is whether the US slows gently or stumbles sharply. And that will, in turn, depend on how long households can keep spending, how nimbly businesses can navigate narrower profit margins, and how soon interest rates drop — if at all.
At this point, the seven warning signs are not signaling a disaster ahead. They’re just telling the truth: The boom is fizzling out, and it looks as if the next chapter of the economy could prove a lot more complicated than the last one.
