Ask an Economist: How Likely Is a Recession?

Key Takeaways 

• Proposed tariffs are creating uncertainty in countries around the globe, making it more challenging for governments and businesses to make big decisions. 
• The continuing war in Ukraine is encouraging some European countries to invest in defense, which could boost innovation but might divert resources from social services and other economic sectors. 
• Some markets are finding silver linings, like additional investments in innovation and infrastructure. 

Around the globe, economic and geopolitical uncertainties are stoking fears of recession — a protracted period of severely reduced economic activity, with declines in both production and employment. But the outlook varies significantly from country to country, depending on factors like proximity to conflict and the potential impact of tariffs. 

Here, seven Indeed Hiring Lab economists in key global job markets share the factors influencing their economies, weigh in on the likelihood that they’ll face a recession this year, and even find a few silver linings. 

In the US: There’s still potential for a soft landing, but it depends on policy

Cory Stahle – Indeed Hiring Lab Economist in U.S.

Earlier this year, it looked like the U.S. economy would pull off a soft landing, but things have gotten more turbulent. Policy changes — including tariffs, immigration restrictions and the reduction of the federal workforce — are creating uncertainty in the labor market and the economy in general, which will likely impact every industry to one degree or another. 

It’s very hard for companies to go about business as usual. 

The health care industry, for example, has seen a lot of growth, but restrictions on immigration could limit its labor pool. 

If tariffs drive up the cost of raw materials for manufacturing, it could impact jobs in that sector.

Colleges and universities are losing, or are under threat of losing, federal funding, which doesn’t bode well for employment in education and scientific research. In a recent Indeed survey conducted by The Harris Poll, 52% of respondents say their organization is preparing for a recession, and 46% say they are worried about layoffs in the coming year. 

From January to February, we saw a 50-percentage-point increase in the number of Indeed job applications started by federal workers at agencies under review by the Department of Government Efficiency (DOGE). We’ve also seen a smaller uptick among all federal workers, regardless of DOGE review status. 

One of the big questions about a potential recession is, what will the Federal Reserve do? If a recession happens, it may have to choose between curbing inflation and keeping people in their jobs. The big concern is that we could end up with stagflation, a situation where people lose their jobs while inflation drives up the cost of living. But we’re not there yet. There is residual strength in the job market, and there is still potential for a soft landing, though it’s narrowing rapidly. So I’m holding on to some optimism. 

“Earlier this year, it looked like the U.S. economy would pull off a soft landing, but things have gotten more turbulent.”

- Cory Stahle, Indeed Hiring Lab Economist focused on the U.S. labor market

In Canada: High tariffs would lead to a recession 

Brendon Bernard – Indeed Hiring Lab Senior Economist in Canada

So far in 2025, the Canadian economy and labor market have effectively been sleepwalking due to uncertainty around tariffs. 

The Bank of Canada didn’t actually put out a forecast in its latest monetary policy report. Instead, it provided two scenarios, one of which assumes that the tariff issues will subside and growth might temporarily slow to a halt, but we wouldn’t hit a full-blown recession. 

The other scenario assumes that the American and Canadian governments go through with proposed tariffs. In this scenario, Canada will go into a substantial recession midway through this year, which will negatively impact exporters, importers and Canadian consumers — and the Canadian labor market as well. 

The most exposed sectors are manufacturing and natural resources, and the workforces in those industries would be in immediate jeopardy. But for now, we’re still in a holding pattern, and job postings on Indeed have stayed relatively steady. 

Additionally, the current uncertainty is prompting policymakers to begin addressing weaknesses in our domestic economic policies, like complicated rules that slow down trade between provinces, which have weighed on the economy for a long time. 

In Japan: Downturn, yes; recession, no 

Yusuke Aoki – Indeed Hiring Lab Economist in Japan

Japan is not expecting a recession, but we do anticipate a downturn: The International Monetary Fund has revised its prediction for GDP growth from 1.1% down to 0.6%. This is partially due to the threat of tariffs, which is weighing heavily on the manufacturing industry. The Purchasing Managers Index, which measures sentiment in manufacturing, hit 48.8% in April; anything under 50% signals contraction in the industry. 

On the bright side, Japan has become less reliant on exporting, and export rates are continuing to fall. 

Meanwhile, wage growth is strong. In Japan, companies typically negotiate wages each spring. This year, many have already completed negotiations and agreed to an increase of around 5.4% — an all-time high. 

However, some firms have not yet conducted annual wage negotiations, and growing uncertainty may discourage them from raising wages, which could lead to employee dissatisfaction. Those employers should consider other ways to retain workers, like enhancing benefits.

In the UK: The domestic economy has shown resilience to mounting headwinds

Jack Kennedy – Indeed Hiring Lab Senior Economist in UK/Ireland

We currently expect to avoid a recession in the U.K., though the growth outlook has weakened. Our economy isn’t as dependent on manufacturing exports as some others, though some sectors, such as pharmaceuticals and automotive, are more highly exposed to U.S. tariffs, and a softer global backdrop will be a drag on growth overall.  

Despite economic headwinds, like a significant increase in mandated employer social security contributions, the economic data for Q1 was better than expected. The domestic economy gathered a bit of momentum, which could potentially help the labor market ride out some of the turbulence from the uncertain global economy. 

Business confidence fell in April following the tariff turmoil, but layoffs have remained fairly modest in recent months. Employers aren’t feeling too bullish right now about increasing their staffing levels, but they don’t seem to be looking to make widespread cuts either. 

Still, there are many unknowns, one of which is wage growth: Year-on-year wage growth in the U.K. remains high at nearly 6%, which is double the rate in the U.S. and Europe. That’s good for workers, but it’s definitely something that Bank of England policymakers are watching as a sign of inflationary pressure. Wage growth is gradually easing, and if that continues it could become easier for the Bank to cut interest rates faster if the economy needs additional support later in the year. 

In Germany: Recession may persist, but infrastructure investments are encouraging

Virginia Sondergeld – Indeed Hiring Lab Economist in Germany

Germany has been in a recession for several years now, due to factors like the war in Ukraine, rising energy prices and lingering COVID-era supply chain issues. 

There are also structural factors holding the economy back: The German government has not invested substantially in infrastructure for many years. 

Earlier this year, the government and economic research institutes were forecasting minimal growth, between 0.0% and 0.3%. If the U.S. tariffs go through, growth will likely dip up to .3% and we may slide into another year of recession. The tariffs will be particularly hard on industries such as automotive and industrial machinery, and the German government will work hard to make a deal with the U.S. 

The good news is that domestic economic policies are already changing. In March, the newly elected German Parliament allowed for €500 billion in infrastructure investments like bridges and railways. Already, stock prices of construction and defense companies have gone up. And the new government is encouraging new policies to stimulate the economy, like lifting corporate taxes on investments and allowing retirees to earn up to €2,000 per month on top of their pensions, tax-free, to keep as many people in the workforce as possible.

In France: No predictions of a recession, but concerns over Ukraine

Alexandre Judes – Indeed Hiring Lab Economist in France

In France, we’re cautious, but we’re not predicting a recession yet. France is not heavily reliant on exports, so potential U.S. tariffs would likely have a limited, sector-specific impact, primarily on aerospace, luxury goods and agriculture. 

The bigger concerns for the French economy are political uncertainty and European geopolitics. There is a lot of uncertainty about whether the war in Ukraine will expand to areas like the Baltics or Moldova. 

Although French governments have been boosting military spending since 2014, the current government will likely make further investments in the defense industry because of the geopolitical risk. That requires finding money in other places, and this is where political constraints and uncertainties come into play. Taxes are already high, and trimming social benefits is very unpopular. The resulting deadlock puts pressure on business confidence, which is impacting hiring investments. 

In Australia: The job market remains strong, though there are signs of trouble ahead

Callam Pickering – Indeed Hiring Lab Economist in Australia

The probability of a recession in Australia is lower than in other markets. The job market remains very strong by historical standards, with an unemployment rate of just 4.1% and job postings on Indeed at 45% above pre-pandemic levels. 

Still, there are some concerning signals. Over the past year, the Australian economy has expanded by 1.3%, which doesn’t seem like a bad result until you consider that population growth has been at 1.8%. On a per capita basis, the Australian economy has contracted over the past two and a half years. 

Additionally, while tariffs aren’t likely to have a significant direct impact on Australia, they will affect Australia’s biggest trading partner, China. One of the reasons for Australia’s sustained economic success is our proximity to China and our ability to provide the resources it needs for economic expansion, particularly iron ore and coal. 

While the mining sector is not a large employer, accounting for just 2.2% of Australian employment, it is a highly lucrative industry. Around 11.5% of corporate income and 41% of operating profit came from the mining sector last year. If demand for resources slows, Australia effectively becomes poorer and that will impact jobs in other sectors.

The Takeaway

It’s a wait-and-see moment for most economies as the impacts of tariffs, conflicts and changing policies play out. But a widespread recession is not a foregone conclusion, and bright spots are emerging in countries focused on shoring up domestic economic policies.

The information presented in this article does not represent a forecast, prediction or other indication of future market or economic performance and should not be relied upon for such purposes.