KEY TAKEAWAYS
- Recent research revealed that three in five Americans believe the U.S. is in a recession and has been for quite some time, even though the economy hasn’t experienced a recession since 2020.
- Many cite financial troubles with their family and friends as to why they believe the economy is in a recession.
- Rising unemployment rates, downbeat economic activity reports and worrying consumer confidence levels do point to a slowing of the economy.
Recent research revealed that three in five Americans erroneously believe the U.S. is in a recession and has been for quite some time.
The biggest reason cited for that belief by respondents in the survey, which was sponsored by buy now, pay later company Affirm (AFRM), was inflation and cost of living. Respondents also pointed to complaints from friends and family about money, as well as friends cutting down on spending or falling behind on credit card debt.
On average, survey respondents said they believe that the recession started in March 2023 and will last about another year, while nearly 70% of survey respondents said inflation is affecting their plans. Many have had to rethink their financial futures, such as the amount that they are able to save and if they can afford upcoming purchases, Affirm said.
US Hasn’t Been in Recession Since 2020
The U.S. hasn’t experienced a recession, as defined by the National Bureau of Economic Research (NBER), since early 2020 at the onset of the Covid-19 pandemic. The NBER defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
In the just-completed second quarter, a key measure of economic activity, gross domestic product, grew at an annualized rate of 2.8%, double the 1.4% rate of the first quarter and far above economists’ expectations.
Nonetheless, the fear that a paycheck isn’t going as far as it used to isn’t unfounded, as inflation has increased the cost of living by more than 21% since 2020, according to the Consumer Price Index. Meanwhile, other recent data has shown that economic activity is slowing, while unemployment is on the rise.
Indicators Point to Slowing Economy
On Friday the Bureau of Labor Statistics reported that U.S. employers added far fewer jobs than expected in July, while the jobless rate rose to 4.3%, its highest level since 2021. The jump in unemployment last month was high enough to trigger the Sahm Rule, a reliable warning sign that has predicted every recession since 1970.
Another recent indication of a possible recession was government data for July that that showed consumer feelings about the current economy hitting a three year low while their future expectations improved.
“More consumers expect future business and labor market conditions to deteriorate near term than the opposite,” wrote Moody’s Analytics’ Justin Begley. “As a result, consumers are indicating an intention to hold off on purchasing plans. If actualized, this could meaningfully cut into real consumption and economic growth.”
Other indicators in recent years have also pointed to a looming recession, only to be proven wrong.