Are we in a recession? Most Americans say yes, even though layoffs are near a record low and virtually anyone who wants a job has one.
The latest IBD/TIPP Economic Optimism Index, which measures consumer confidence each month, found 58% of surveyed Americans think the U.S. economy is in a recession. This is up from 53% last month, and 48% in May, the poll says.
Less than one in five (19%) of surveyed adults say their wages have kept pace with inflation. In fact, more than half (54%) of those surveyed say their pay has not been able to keep up as the consumer price index has hit a new 41-year high.
And Wednesday’s CPI report showing that U.S. inflation hit 9.1% in June jolted the public, leading the 9.1% figure to trend on Twitter throughout the day. Google queries for “What is the definition of a recession?” and “How bad will the recession be?” also spiked more than 5,000% in the hours after the CPI report was released.
So it’s not surprising that 91% of Americans in the IBD/TIPP poll say they are concerned about the path of inflation over the next 12 months.
But it should be noted that the National Bureau of Economic Research (NBER) has not officially declared the country in a recession. The NBER defines a recession as “the period between a peak of economic activity and its subsequent trough, or lowest point,” with an emphasis on a “significant decline in economic activity” that lasts more than a few months.
So yes, inflation is hitting record highs right now. But the U.S. also created a robust 372,000 jobs in June, and hourly pay rose 0.3% — although wage growth is slowing. The economy is at a crossroads, but the conflicting data doesn’t necessarily put the U.S. in recession territory just yet.
Read more: U.S. creates 372,000 jobs in June with strong labor market seen as bulwark against recession
“There is no fixed rule about what measures contribute information to the process or how they are weighted in our decisions,” the NBER adds in its explanation of its business cycle dating. “In recent decades, the two measures we have put the most weight on are real personal income less transfers and nonfarm payroll employment.”
There are exceptions, of course, such as the April 2020 downturn after the emerging COVID-19 pandemic shut down large swaths of the economy. Even though the drop in economic activity after the February 2020 peak was brief, it was classified as a recession because it was “so great and so widely diffused throughout the economy,” according to the NBER.
And the NBER committee’s approach to determine the dates of economic expansion and recession are retrospective, meaning that an official declaration of a recession probably won’t be made until the country is already in one, and the committee has sufficient data to make that determination.
What does the Federal Reserve say? A new Fed paper authored by five economists sees a one-in-three chance of a recession by next year, but the authors don’t see a recession as “imminent.” Fed chairman Jerome Powell also recently said that getting inflation down to 2% could help stave off a recession.
One silver lining is that the NBER also notes that most recessions are brief — although the time it takes for the economy to return to its previous peak level of activity can certainly take an “extended” length of time.
Even if a recession is not here yet, 70% of Americans believe one is coming, according to a separate poll by MagnifyMoney, citing inflation, housing costs and inflation as warning signs of an economic downturn. And two-thirds of people surveyed say they don’t feel financially prepared for a recession.
If you have concerns about what money moves to make in light of the recent peaks in inflation, and the fears of a looming recession, MarketWatch is here to help. These are some tips to protect your finances during periods of uncertainty. And here are three smart financial moves to make right now in light of the Fed’s recently announced rate hike.
And here are some steps to take if you plan to retire in an age of inflation, or the numbers you should start crunching now to determine whether inflation is bad enough to delay your retirement. Finally, retirees on edge over inflation and stock volatility can take these five steps.