The odds of a recession appear to be rising as higher oil prices, weaker job growth, and pressure on household budgets cloud the outlook for an economy that was already showing signs of strain. Economists quoted in a CNN article say that if energy costs stay high and consumers start pulling back on shopping, travel, and dining out, the slowdown could spread quickly. For banks, one important question is which customers will feel it first.
John Silvia, former chief economist for the Senate Banking Committee and Wells Fargo and founder of Dynamic Economic Strategy, and Tom Brown, CEO of Second Curve Capital, recently told ProSight that the answer is unlikely to be evenly spread.
The K-shape still matters. Brown said the top 60% of income distribution accounts for between 75% and 80% of public spending, and that “the wealthy don’t change their spending pattern as much as the bottom 50%” in a downturn. If the economy cools, he said, “where you’ll see a change [is] for lower income segments, particularly in where that money is being spent—going from discretionary to non-discretionary items.”
Younger borrowers look more exposed. Consumers ages 18 to 29 are the group most likely to feel the effects of unemployment or underemployment. Silvia said that “it is traditionally true that their delinquency rates are higher than for more mature consumers.” Looking back at 2025, delinquency rates for both credit cards and auto loans rose significantly among these younger consumers.
A weak-feeling job market can still leave damage behind. Brown described a “no-hire, no-fire” economy, especially in transportation, manufacturing, and warehousing. Automation processes, he said, are helping keep employment levels stable, but “prospects for future employment aren’t as bright as they might have been several years ago.” That kind of labor market can keep headline unemployment low while still leaving younger and lower-income households stretched.
Affordability pressures are not easing. Groceries, electricity, and medical care are all weighing on the consumer wallet. Housing adds another layer of pressure, with higher mortgage rates, elevated prices, and limited affordable inventory continuing to squeeze both existing homeowners and first-time buyers.
Banks may need to look past the national averages. Silvia noted that conditions can differ sharply by market. In a cooling economy, those local differences could shape spending, borrowing, and credit risk more than the headline numbers do.
