This is part of the Callahan Financial Performance Series. Presented by the analysts at Callahan & Associates, the Financial Performance Series helps leaders interpret data to drive smarter decisions and uncover new approaches to measure performance.
The U.S. economy is a source of anxiety for many people across the United States. Americans are stressed about their finances for a variety of reasons, including tariffs, the job market, inflation, and a sense of pessimism that all generally revolve around uncertainty. Still, there are reasons to be hopeful: unemployment remains in a healthy range, consumer spending has slowed but is still growing, and the stock market continues to push record highs. Looking ahead, the Federal Reserve is likely to cut its benchmark interest rate in the near term, which will lower borrowing costs and boost economic growth, but even this possibility is not without
Such mixed signals make it difficult for credit union leaders to effectively run their shops. After all, the macroeconomic environment has significant implications both for credit union operations and member financial health. With that in mind, should credit union leaders be optimistic or pessimistic about the state of the economy?
The Credit Union Case For Pessimism
The case for a pessimistic economic outlook centers on the slowdown in the labor market and tariff-driven inflation. These headwinds not only have the potential to slow economic growth but also come predominantly at the expense of working class people, who are more likely to be members of credit unions.
The job market has slowed significantly in recent months. The Bureau of Labor Statistics’ August job numbers showed the slowest hiring rate in 15 years and included a sharp revision to the negative in May and June. The three-month average payroll growth rate is increasing at the slowest pace since 2010, according to analysis presented during Callahan & Associates’ second quarter Trendwatch webinar. Meanwhile, year-over-year wage growth continues to decelerate, with a three-month moving average of 4.1% in July. Although this beats the inflation rate, it’s not a good sign for American financial health.
Core PCE inflation, the Fed’s favorite inflation index that accounts for personal consumption but strips the more volatile prices of food and energy, has remained calmer than many prognosticators had forecasted; however, tariff pressures have begun to creep into the top-level numbers. The price index rose 0.3% in July, and 2.8% year-over-year, still stubbornly above the Fed’s 2.0% stated inflation goal. Overseas imports now cost more, and those price increases will pinch the budgets of credit union members, putting them on shakier financial ground.
Student loans also are creating a drag on the economy. With the payment freeze lifted, borrowers must now resume repayments or default on the debt. Both have implications for the broader economy. Money toward repayment is money not spent in the broader economy or saved for a rainy day. Defaulting on federal student loans can also have knock-on effects in the future such as wage garnishment.
The Credit Union Case For Optimism
The optimistic case is more difficult to parse, but it’s there. The bright side centers on still-mild inflation, resilient consumer spending, and solid stock market gains increasing the wealth of many asset owners, at least on paper.
For months, economists have argued that inflation would follow higher tariffs. So far, that has not born out for a couple of reasons. First, the effective tariff rate of 9% comes in well below the advertised rate of 15%. Second, many retailers stocked up prior to the tariff implementation and many also are . Companies can’t do this forever, but any price increases are likely to come at a slower rate than anticipated.
Although consumer spending was weak in the first half of 2025, the second quarter ended with consumer spending up 1.4 annually, a significant increase from 0.5% growth in the first quarter. Consumers might have sharply curtailed spending in the wake of Liberation Day tariff announcements, but they seem to have adjusted their expectations. If the Fed does cut interest rates, the move is likely to further boost consumer spending. The cut would be a particular relief for lower income Americans, for whom interest payments comprise a large share of their budget.
Lastly, the AI-driven stock market boom has given many consumers the feeling they can spend more freely, buoying the economy as long as the good times last. Although working class Americans are less likely to materially gain from these increases, 62% of Americans do own stocks, so this wealth effect will have an impact on a wide swath of the population.
Ultimately, should credit union leaders be pessimistic or optimistic? There are good reasons for both sentiments, but the key is to cater to individual members.
No matter what the economic averages indicate, everybody is on their own financial journey, with varying feelings of comfort and success. Even in an economic downturn, most credit unions will have a variety of members in different situations. Treating each member as an individual, not as a statistic, through both good times and bad, is what differentiates credit unions and earns member trust.