What the coming economic shifts mean for credit unions

This month's Economic Update examines the overall economic outlook based on recent announcements and economic shifts, including some updates on events from the start of the year.

Shifts in the overall economic forecast

2025 GDP is expected to be 0.5 percent, and the odds of a recession in the next year are over 60 percent. However, any recession is expected to be short-lived and moderate.

Good news in the forecast

Household debt is much lower than in the years before the Great Recession. That supports our forecast team's contention that any recession is likely to be moderate. Additionally, the restrained housing supply will help keep home values stable.

The bad news in the forecast

While unemployment is low, the hiring rate is also low. The full impact of federal government layoffs has yet to be seen. Unemployment is expected to rise to 5 percent by the end of the year and remain at that level into 2026.

Tariffs will raise import prices, and the initial attempt to find cheaper parts and absorb some of the rising costs will result in some of the increase being passed on to consumers. Additionally, absorbing some of the increased costs will create a loss of profits for the corporate sector. The end result will be lower investment and consumption.

What this means for credit unions

Consumers will likely save more of their paychecks and, in uncertain times, are more likely to do so with trusted, federally insured institutions like credit unions. This is likely to be the strongest year for share growth since 2021.

Loan growth will only be slightly higher this year over last year, and most loans will be made during the first half of the year. If unemployment rises as expected, that will bring an anticipated increase in delinquencies and charge-offs.

The pressure put on credit union earnings in 2025 will ease off in 2026.

With the economy poised for a slowdown, now is the time for credit unions to review the adequacy of their loan loss reserves so that they are well-positioned to assist their members through any economic distress.

Get more from the full video

Find the complete forecast here. Access even more data to help you prepare for the coming economic changes.