You’ve heard of inflation (and know how terrible it is), but have you heard of “stagflation”? It’s also terrible. Merriam-Webster defines stagflation as “persistent inflation combined with stagnant consumer demand and relatively high unemployment.” Yikes.
Find Out: 4 Surprising Things That Could Impact Your Wallet If a Recession Hits
Read Next: 7 Luxury SUVs That Will Become Affordable in 2025
Some economic experts think that stagflation in the U.S. is on the horizon. Why? What signs indicate stagflation is coming and what can you do to financially prepare for it?
A slowing GDP (gross domestic product) growth — when the economy’s output starts to decline or contract — is a big red flag warning of stagflation. And that flag was waved earlier this year. GDP decreased at an annual rate of 0.3% in the first quarter of 2025 (January, February and March), according to the advance estimate released by the U.S. Bureau of Economic Analysis [2].
Invest in Gold
Powered by Money.com – Yahoo may earn commission from the links above.
“The Federal Reserve now projects real GDP growth at 1.4% for 2025, down from 1.7% in its March projection,” said Alex Tsepaev, CSO at B2PRIME Group. “The OECD and World Bank have also downgraded U.S. growth expectations due to trade tensions and policy uncertainty. Additionally, the Conference Board’s Leading Economic Index (LEI) declined again in May, marking a 2.7% drop over the past six months, which is approaching recessionary territory.”
Learn More: Mark Cuban Warns of ‘Red Rural Recession’ — 4 States That Could Get Hit Hard
Back to the word so closely tied to “stagflation” — inflation. A key sign of stagflation is persistent inflation. This is also called “sticky inflation,” and we see it hover around essentials like food and fuel.
“These categories are less sensitive to interest rate hikes, which makes them persistently expensive,” said Dane May, principal and co-founder at DePaolo & May Strategic Wealth. “These are non-discretionary expenses that strain household budgets. When consumers are forced to spend more on essentials, they cut back elsewhere. That slows economic growth and makes inflation more painful because it’s tied to necessities rather than luxury or optional spending.”
Another key warning sign of stagflation is a weakening labor market. With this, we see a decrease in job openings, layoffs and rising unemployment rates. Right now, the labor market is showing signs of weakening.
“Recent jobs data has consistently missed economists’ expectations,” said Jake Falcon, CRPC, CEO at Falcon Wealth Advisors. “Employers added far fewer jobs in February than in January, and unemployment claims have risen. This softening labor market is a classic precursor to economic stagnation.”
Story Continues
