Are you Prepared if the Economy Slows Down?

Apple Podcast Spotify

Are you Prepared if the Economy Slows Down?

Are you prepared if the economy slows down? Today I want to highlight some economic signs that indicate a slowing economy. One of primary places we see this happening is in the jobs market. The labor market added 22,000 jobs in the month of August. This was a disappointing number; much weaker than the number of jobs we are used to seeing added. Additionally, June and July numbers were revised downward, showing a weaker picture than was originally reported. Also on the job front, there was a massive revision for hiring between March of 2024 and March of 2025, restating 911,000 fewer jobs added than originally reported.

The good news is that this has not yet translated to layoffs. It could be that the reason we are seeing so fewer jobs recently than we have in the past is due to AI and other productivity enhancements that are limiting the need to hire additional workers. But it could also be that business activity in certain sectors is slowing, reducing the need to hire new employees to service new business. My best guess is it’s the latter.

Let me share another troubling trend, the trajectory of the Conference Board’s Leading Economic Indicator Index. The purpose of the LEI listed on the Conference Board’s website is ” to provide an early indication of significant turning points in the business cycle and where the economy is heading in the near term.” It peaked in mid-2022 and has been going down ever since. The index did a great job of calling the .com bubble popping back in 2000. It also flashed a recession signal just before the great recession in 2008. However, it also flashed a recession signal pretty consistently in much of late 2022 and most of 2023. But a recession has yet to materialize. For this reason, it began raising a yellow flag during that time to be careful, that a recession might be looming on the horizon. I’ve been wrong so far. It hasn’t happened yet.

More than anything, I couldn’t help but think that the monetary policy during Covid and the massive increase in the money supply would have to eventually have a boomerang effect that would hurt the economy. I don’t know if you remember this or not, but back in 2022, the yield curve turned negative, a classic recession warning sign. Additionally, we’ve forgotten it, but the S&P 500 was down about 20% that year. It is truly amazing that we have reverted recession so far and speaks to the amazing resilience of the U.S. economy. Today, the yield curve is no longer negative, and the stock market is having another good year, albeit not as strong as last year. All of this is just another reminder that there are no perfect economic stats, there are not perfect economists, and there is just no way that anyone can consistently predict the future. But I have said in previous episodes although we cannot predict, we can prepare for a variety of scenarios. And so, one of the purposes of today’s episode is to make sure you are factoring in the scenario of a slowing U.S. Economy in your decision making.

I’ll give you an example of how this mindset could have helped you over the last four years. Let’s say that you are a builder of nice, upper-middle class speculative homes in the Nashville market. When I say speculative, this means that you build these homes before you have buyers for these homes. Nashville is one of the hottest markets in the Southeast. Not long ago houses were selling within minutes of listing, often at prices that were higher than listing price.

As of today, the Nashville market for certain priced homes is just barely crawling. Now, entry level houses are moving, but medium priced to expensive houses are sitting on the market. This is a stark change to what we’ve seen in the last several years. A Realtor friend in Nashville told me that this is the slowest many have seen it since 2008. Now, let’s say you were this builder, and even though you expected that the city is such a hot destination, that people would just keep coming there and that there would be no letup on demand; you saw yellow lights flashing on some economic indicators in 2022 and 2023. Let’s say that you thought, at that time, “I’m going to keep building house, but I’m going to scale back a bit and only build with accumulated cash rather than borrowing money.” If you did this, you would have options many other builders today don’t. Some builders just continued with guns blazing, borrowing as much money as they possibly could. If those builders’ inventory isn’t moving, they are stuck paying lots of interest while they wait on buyers for their homes. So, are you prepared if the economy slows down? What happens if your growth assumptions don’t pan out? Do you have a plan B or plan C? I believe that wise small business owner leadership accounts for these scenarios – a base case assumption, a better case assumption, and a worse case assumption. This just allows you to identify your risk in any environment, so you are not surprised if your assumptions are wrong.

In my mind, the most important practical takeaway in today’s economic environment is to limit or reduce debt and to build more cash than you might normally carry. This doesn’t mean that you don’t play offense. Seize opportunities as they come along. But be selective and picky about those opportunities so you are not stretched too far. When times are good it is human nature to think they will always be good. Likewise, when times are bad, we can be tempted to think they will always be bad. The truth is that economic cycles ebb and flow. There are good times and bad times, and none of us know how long each will last or when it’s about to change. So, the best thing we can do is to look for opportunity in bad times, and to have eyes wide open for threats in good times. If you can think like this as a small business owner, I believe it can help you have the staying power to keep your doors open and help lots of people for years and years, across all different stages in the economic cycle.

If you’re a small business, we really do want you to give you the tools, including what we are seeing from our seat, to help you succeed. If you want to work with us start your financial conversation with us today at foundationbank.org. It really will be worth your time. We hope you’ll subscribe to this podcast to it in your favorite podcast app and share it on social media. Until our next episode, God bless you.

-President Chad P. Wilson, CFP

Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of Foundation Bank/McKenzie Banking Company on September 22, 2025. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. Any rates mentioned are subject to change and are accurate as of the recording date. Foundation Bank/MBC is an Equal Housing Lender, Member FDIC.