The U.S. economy shrank last quarter. Is a recession next?

Americans are increasingly worried about the economy, with about 6 in 10 concerned that a major recession is "right around the corner," according to a recent survey from AllianzLife. The reasons for their anxiety are clear: Economic activity shrank in the first three months of the year, inflation is at a 40-year high and the stock market is sliding.

Despite those signals, most Wall Street economists do not expect a recession this year. More likely, they say, is a "hard landing" in 2023 linked to the Federal Reserve's move to hike interest rates. Such monetary tightening, which is aimed at dampening inflation, could backfire if consumers and businesses pull back too quickly, according to experts.

Although economists don't predict a slump in the current year, consumers and businesses are battling several headwinds that are hitting their pocketbooks. For instance, worker wages are rising, but inflation is gobbling up those gains, putting household budgets in the red. Businesses are constrained by supply-chain bottlenecks and employee shortages, adding to the costs of their operations.