The percentage of consumers who expect unemployment to rise over the next 12 months soared to 65% in April, according to the University of Michigan’s survey of consumer sentiment.
That shock to household confidence is on par with that observed during the financial crisis, when unemployment peaked at 10%, and exceeds that during the early portion of the pandemic era, when unemployment surged to 14.8%. In those cases, consumers reset employment expectations because of large economic shocks.
The current disruption caused by U.S. trade policy will hurt consumer spending in the near term and contribute to what we expect to be a midyear recession.
While we do not anticipate a surge in unemployment on par with the financial crisis and pandemic, the rise in unemployment over the next 12 months will be sufficient to tip the economy into recession.
We expect the unemployment rate to increase to 4.3% when the jobs data for April is released on Friday, while the monthly change in hiring will slow to 140,000.
Read more of RSM’s insights on the economy and the middle market.
Any move below 100,000—the number necessary to keep employment conditions stable—in monthly hiring would appropriately be interpreted as a result of the current policy shock coursing though the economy.
Our current 2025 baseline scenario for the U.S. economy expects an increase to 5.5% in the unemployment rate by the end of the year as the economy falls into recession.
