It’s hard to ever get a straight answer about whether or not we’re in a recession. A traditional recession is typically defined as two consecutive quarters of negative economic growth, as measured by a country’s gross domestic product (GDP). It’s often accompanied by rising unemployment rates, falling consumer spending, and a decline in industrial production. According to this definition, we are not technically in a recession. So, how come so many of us still feel like we’re financially struggling?

The answer may be a so-called “silent recession.” This is a more subtle economic downturn that may not meet the technical criteria of a traditional recession but still impacts the daily lives of many individuals. During a silent recession, the stock market often remains stable and unemployment appears low, but people still have trouble making ends meet or are living paycheck to paycheck. Let’s take a look at what it means to be in a silent recession, and what it means for your finances.

Signs of a silent recession

While official economic indicators may paint a positive picture, several signs can point to a silent recession:

Stagnant wages: Despite low unemployment, wages may not keep pace with inflation, leading to reduced purchasing power.

Underemployment: People may be working, but in jobs that don’t fully utilize their skills or provide sufficient hours.

Increased debt: Individuals and families may rely more heavily on credit to maintain their standard of living.

Housing issues: Rising housing costs may outpace income growth, making it difficult for many to afford homes or rent.

Reduced savings: People may find it challenging to save for emergencies or long-term goals.

Are we in a silent recession?

While the U.S. economy has shown resilience through the past few years of recession fears (including the failure of three U.S. banks in 2023), signs indicate the possibility of a silent recession. There’s undoubtedly a disconnect between positive economic indicators and the financial struggles of many Americans.

After all, your economic picture can vary widely based on factors such as location, industry, and individual circumstances. While some sectors and individuals may be thriving, others may be facing significant financial pressures. If this sounds like you, let’s take a look at some tips to get your finances back on track.

Tips for navigating a recession

Whether facing a traditional or silent recession, or simply struggling on an individual level, there are steps you can take to improve your financial stability:

Build an emergency fund: Aim to save around six months of living expenses to provide a buffer during tough times. Here are my tips to getting this fund off the ground.

Diversify income streams: Consider developing multiple sources of income to reduce reliance on a single job.

Reduce debt: Identify your highest-rate debts and create a plan to tackle them aggressively before they balloon out of control.

Live below your means: Or, at least, avoid lifestyle creep. During a recession, your means of increasing your income—raises, promotions, and side hustles—will be limited. So while it feels more ideal to start bringing in more money, focusing on cutting back is perhaps more important.

Stay informed: Recessions make everything uncertain. Stay sane by staying on top of money news, and adjust your financial strategy accordingly.

The bottom line

While the U.S. may not be in a traditional recession as of 2024, the concept of a silent recession highlights the complex nature of economic well-being. It all serves as a reminder that official economic indicators don’t always reflect the financial realities of many individuals and families. Eye-catching headlines will never be an accurate snapshot of your personal financial picture.

By focusing on proactive steps to strengthen personal finances, you can better navigate both traditional and silent recessions. For some more grounded personal finance tips, here’s our guide to getting your budget started, and here are personal finance steps you can take now to prepare for a recession on the horizon.