The U.S. economy is losing steam and recession fears are rising The country's GDP growth is slowing as banks cut back on credit and the Federal Reserve tries to crack down on inflation.

The U.S. economy is losing steam. Bank woes and other hurdles are to blame.

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From banks to burger joints, the U.S. economy is showing signs of stress. Nervous shoppers are watching their spending, and anxious lenders are keeping a tight grip on credit. That's likely to lead to slower economic growth and maybe - maybe - even a recession. Numbers released this morning by the Commerce Department show a downshift in economic growth during the first three months of the year. NPR's Scott Horsley is with us now to tell us more about it. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Michel.

MARTIN: So, Scott, you were telling me that this report covers the nation's gross domestic product, which is the broadest measure of economic activity. Is that right?

HORSLEY: That's right.

MARTIN: So what does it tell us?

HORSLEY: Yeah, it shows GDP expanded at an annual rate of just 1.1% in the first quarter, down from 2.6% at the end of last year. Consumer spending actually held up pretty well at the beginning of the year, thanks in part to a big jump in spending on cars and trucks as well as restaurant meals. But the economy is expected to lose more steam in the months to come. The CEO of McDonald's said this week he's expecting a mild recession in the United States, even though the fast food chain reported solid sales in the first three months of the year. CEO Chris Kempczinski says customers are getting more cautious. For example, they're less likely to splurge on their orders after two-plus years of rising food costs.

CHRIS KEMPCZINSKI: Things like, did someone add fries to their order? We're seeing that go down in most of our markets around the world - slightly, but it's still going down.

HORSLEY: Lower income families in particular are feeling the pinch of rising prices, and they might be relying on increasingly costly credit cards to stay afloat.

MARTIN: But the job market is still very strong. Would you help us understand why people are still so nervous or getting so nervous?

HORSLEY: Yeah. Unemployment's still really low, just 3.5% last month. So the job market has not fallen off a cliff. But there are some caution signs on the road. Job growth in March was the slowest in over two years. Layoffs, which had been really low, are inching up just a little bit. Even some profitable companies like McDonald's and General Motors have been cutting back on their white collar workforce. I spoke to Desiree Prince (ph), who lives in Alexandria, Va. She's 37 and feels like her own job is stable. But when she looks around, she doesn't much like what she sees.

DESIREE PRINCE: I actually don't know what to think. I entered the workforce during the last recession, so it's like, I don't know. You started seeing banks start to fail and companies like Microsoft and Facebook laying people off. It doesn't feel great.

HORSLEY: So Prince is watching her pennies. She's planning a summer vacation with her mom and sister this year, but because airfares have jumped nearly 18% from a year ago, they've decided to stick to destinations they can reach by car.

PRINCE: We've been frugal with our travel. We're like, hey, do we want to pet the dolphins? Well, that's a bit pricey. Maybe we'll just do the free national parks.

HORSLEY: It seems like the era of revenge travel, when people were desperate to get out and willing to pay almost any price, may be coming to an end.

MARTIN: And it seems that it isn't just families that are watching their pennies. Banks seem to be getting stingy with credit, too.

HORSLEY: That's right. And credit's expected to get even tighter after the collapse last month of Silicon Valley and Signature banks. And when businesses can't get credit, that slows down economic growth. Mike Keating (ph) runs a company that builds apartments in Minnesota. He's witnessed that firsthand.

MIKE KEATING: Some of the regional banks here in the Twin Cities that do a lot of construction, they're not lending at all right now. I think there's going to be negative impact on the construction industry. We will actually see for the first time in a while where jobs start to drop in this industry a little bit.

HORSLEY: There are still a lot of apartments under construction, but builders are not breaking ground on a lot of new projects right now.

MARTIN: That's NPR's Scott Horsley. Scott, thanks so much for explaining all of this.

HORSLEY: You're welcome.

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