Worried About a Recession? These 2 Stocks Could Signal What's Next for the Economy.

The U.S. economy is at a really interesting juncture right now.

Over the last few years, the U.S. has added more than 15 million jobs -- more than recovering jobs that were lost during the peak of the COVID-19 pandemic. At the same time, inflation has continued to cool from peak levels in 2022.

But with that said, July's unemployment rate of 4.3% was the highest level over the last 12 months.

All in all, it seems the current economic picture is a mixed bag. Perhaps this is why Goldman Sachs sees a 25% chance of a recession in 2025, while JP Morgan is calling for a 35% probability.

After reviewing the earnings reports of two different consumer discretionary businesses, I'll admit that I also see the future of the economy as quite murky. Let's explore how Starbucks (NASDAQ: SBUX) and McDonald's (NYSE: MCD) can each serve as a barometer for the macroeconomy , and what the respective earnings reports show as it relates to the current state of the consumer.

1. Starbucks

One of the most important operating metrics to check at brick-and-mortar businesses is same-store sales. Same-store sales measures how much growth the business is experiencing among comparable locations over a specified period.

When same-store sales rises, then it suggests that consumers are returning to your stores and increasing their spending. Understanding these trends play an important role when retail outlets are considering expansion.

The table below shows Starbucks' same-store sales growth and loyalty members over the last year.

Data source: Investor relations

Over the last year, Starbucks has gone from growing its comparable sales by double-digit percentage points to experiencing consecutive quarterly declines. While the company's loyalty membership has risen by 7% over the last year, these trends have been more inconsistent throughout much of 2024.

I understand that consumers have preferences when it comes to food and drinks. However, it's important to step back and realize that Starbucks' entire business revolves around selling a commoditized product.

With so many alternatives on the market, you may think coffee drinkers are simply looking for lower-cost solutions when compared to a pricey latte from Starbucks.

2. McDonald's

Similar to Starbucks, McDonald's is a household name in the restaurant industry . According to the company's second-quarter earnings report, same-store sales decreased by 1% year over year. To put this into perspective, this was the first time that McDonald's posted a deceleration in sales since 2020.

Considering that consumers weren't exactly leaving their homes at a high frequency during the pandemic, it's understandable why McDonald's experienced a slowdown at the time. But now? Something more pernicious could be lingering in the background.

Management at McDonald's has been talking for quite some time about its struggles with cost-conscious consumers. The company has made a number of strategic initiatives in an effort to bring this core customer cohort back to their restaurants.

Namely, McDonald's has been testing a $5 meal deal alongside the company's famed dollar menu. According to management, the average checkout for the $5 meal deal is actually closer to $10. This implies that consumers are adding extras to the $5, which is certainly an encouraging sign for McDonald's.

Unfortunately for investors, it will take time for the trends driving these initiatives to really begin showing up in the financials. So, while McDonald's did experience a nominal decline in same-store sales in the most recent quarter, there are reasons to believe a reacceleration is in the works.

Image source: Getty Images.

The bottom line

Similar to the jobs and inflation data shared earlier, the financial and operating results from Starbucks and McDonald's paint a puzzling picture.

Starbucks seems to be struggling to connect with consumers and persuade them to come into their coffee shops and purchase an upscale, higher-priced drink. By contrast, McDonald's has swiftly adjusted its menu to be more appealing to a core customer demographic and has found that consumers are spending more as a result.

Although the future of the economy remains cloudy and the likelihood of a recession is unknown, I think it's appropriate to say that consumer purchasing power isn't exactly strong right now.

For these reasons, I think smart investors may want to take a closer look at consumer discretionary businesses and analyze how metrics such as comparable sales, loyalty memberships, and price mixes among goods and services are trending. All of these key performance indicators can help shed light on where and what consumers are spending and how it impacts the broader economy.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group, JPMorgan Chase, and Starbucks. The Motley Fool has a disclosure policy .