The calm before the storm? So far, there’s no recession. But business leaders are reluctant to hire, buy, or invest. As the possibility of a trade war looms, some are already tightening their purse strings—potentially leading to an even greater decline in economic activity.

Mentions of “uncertainty” in the Federal Reserve’s Beige book (the collection of interviews they conduct with businesses to keep their fingers on the pulse) jumped to 80 in April, 2025.

To put that in perspective, the word was only mentioned 19 times in the April 2020 edition, during the early days of the coronavirus pandemic, and 16 times in October of 2008, during the heyday of the financial crisis.

As businesses, employers, and employees face greater uncertainty about the future, many fear a recession. Here are some key indicators that suggest an economic downturn may be on the horizon—and how HR leaders can help employees navigate this period of financial anxiety and instability.

For decades, the U.S. has been considered a safe financial investment. Whether investing in U.S. bonds, purchasing real estate or opening an office in the U.S., the relative political and economic stability of the U.S. made these investments feel secure to many foreign investors.

But with new tariff policies that change weekly (if not daily), multinational companies are reconsidering the value of opening a U.S. branch, factory, or other facility. What’s more, businesses are increasingly recognizing that U.S. economic policy is now linked to which political party is in power—and that the policy swings between the two are wider than before.

Rather than re-organize their plans every 4 years, foreign investors are quietly turning away from America.

“Overall, a tendency to take big bets — two- to three-year investments, or five- to 10-year investments with a new manufacturing location — all of those are on pause,” Aparna Bharadwaj, a consultant at Boston Consulting Group, told Axios News (4/25).

“Any business that wants to make those kinds of big investments will need to have certainty behind it,” Bharadwaj says.

But it’s not all bad news—a new report from Barron’s found that foreign buyers are still buying up U.S. debt. To some, this indicates that foreign investment in the U.S. is far from over, especially given the significance of the U.S. dollar and its role as the global reserve currency.

Economists and CEOs are currently predicting a recession in the U.S. later this year, largely driven by tariffs. But it’s not the tariffs themselves that could be the biggest contribution to a slowed American economy.

Nobel-prize winning economist, Paul Krugman, told Newsweek that the biggest tariff-related contributor to an economic downturn has to do with the uncertainties caused by these tariffs.

“A stable tariff rate would not cause a recession,” Krugman said, “But an unpredictable tariff rate that can change the next day is really a depressing effect on demand.”

“The Trump tariffs…are extremely uncertain. Nobody knows what they will be. Nobody knows what comes next.”

Krugman isn’t alone in his prognostications.

A survey of over 300 CEOs in April found that 62% predict a recession or other economic downturn before November of 2025. When asked if the proposed tariffs would hurt their business, a full 75% of the CEOs surveyed answered “Yes.”

While these predictions are not rosy, there is still a possibility that the tariffs will not go into effect.

One week after President Trump’s so-called “Liberation Day” tariff announcement sent markets into a tailspin, the president postponed tariffs for 90 days. Similarly, when stock markets stuttered after the president’s repeated statements about firing Federal Reserve chair Jerome Powell, the president stated publicly that he had no plans to fire the chair.

It appears President Trump has little stomach for a cascading stock market. Should the markets respond to his impending tariffs before they’re fully implemented, we may see another postponement.

Recessions typically drive layoffs as businesses aim to run lean to stay alive in a reduced economic climate. However, recessions do not necessarily guarantee layoffs—there are other ways companies can reduce costs to stay afloat.

Rather than laying off workers, companies can freeze hiring, limit expenses (like travel, C-suite bonuses, extra office spaces), and reduce salary growth.

While few of these measures are likely to be popular with employees, they offer alternatives to layoffs. Sharing these options with employees and leadership can help calm anxiety during times of uncertainty.

As much still remains to be seen regarding tariffs, it would be unwise for companies to act on worst-case scenario thinking.

Here’s how you can help employees who are feeling anxious about the future:

• Keep an open dialogue. No one likes being left in the dark. Let employees know where things stand. Work with leadership to build plans for the future. If you’re fielding a lot of questions about layoffs, let leadership know. It might be time for a company-wide meeting to address those concerns proactively.
• Encourage creative solutions. Most employees would prefer not to receive a raise than face losing their job. If a recession does happen, there are ways to ride it out without holding layoffs. Temporarily halting 401(k) contributions or ending bonus programs could help lower costs without reducing headcount. Presenting these as possible solutions to leadership can help prime them for creative solutions, should they need them.
  • Example: Here at HRInsidr, our Editor-in-Chief once worked for a company that successfully avoided layoffs by implementing a salary reduction policy. Everyone, regardless of their level, had their salary reduced by 10%, while the CEO took a 50% pay cut. It’s hard to overstate how much this can boost a company’s culture: it imbues the company with a sense that everyone is on the same team, and drives home the idea of servant leadership, where leaders are there to serve the mission, not rake in cash. This move by our editor’s former employer had benefits that reverberate to this day—many of the people from that company are still loyal to those leaders.

• Build financial resilience. Economic downturns happen. But for many, the inflation of the past few years has made saving difficult. If employees are worried about the financial fallout of a potential layoff, encourage them to pursue financial literacy courses to help them build a safety net for the future.

None of us has a crystal ball into the next 6 months. But as the economy becomes more volatile, maintaining a flexible and resilient attitude can go a long way towards remaining calm in the face of so much change.

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