The United States met the rule-of-thumb definition of a recession — two consecutive quarters of negative growth — last month as the economy shrank at a 1.5% annualized rate in the first quarter and contracted at a 0.6% pace in the second quarter. Citing employment data, economists in the White House have rejected the idea that the nation is in a technical recession.
The poll from Bankrate nevertheless shows that Americans are reporting changes in behavior as economic pressures continue. Among the 74% of respondents who are taking steps to prepare for a recession, 47% are cutting discretionary spending, 35% are saving more for emergencies, and 30% are paying credit card debt.
“While some Americans indicate they believe the economy is already in a recession, it is perhaps more important that so many are already taking actions based on their fears or beliefs that one is inevitable over the next year or so,” Bankrate senior economic analyst Mark Hamrick said in a press release.
However, David Bahnsen — the founder of Manhattan-based wealth management firm The Bahnsen Group — pointed out to The Daily Wire that sentiment data is not always correlated with actual economic behavior.
“There is an unfortunate but predictable trend in economic data for Americans to reflect in sentiment and surveys a desire to curtail spending, but then demonstrate in action and behavior a very strong comfort level with going to the mall,” he explained.
The personal saving rate — the portion of disposable income Americans devote to savings — was 5.1% in July, according to data from the Bureau of Economic Analysis. Although households saved between 10% and 35% of their income in the months that followed COVID and the lockdown-induced recession, the personal savings rate is currently well below the 7% or more Americans saved through much of the last decade.
Indeed, Bahnsen said that he is concerned about Americans neglecting to pay credit card debt or save for emergencies in the first place.
“Saving is investment; we cannot have invested dollars that are not first saved dollars. Greater investment equals greater productivity,” he continued. “And greater productivity equals more growth. Consumption will come; but when we starve production through inadequate savings, we cut off the real key to economic output.”
With respect to inflationary pressures, 51% of respondents to the Bankrate survey predicted that inflation will be higher one year from now, while only 16% expect inflation to decrease.
Last week, President Joe Biden signed the Inflation Reduction Act, which carries a $740 billion price tag — including $369 billion in climate funding. According to a report from the Tax Foundation, households will see declines in after-tax incomes between 0.2% and 0.3% as a result of the legislation.
The White House is also facing criticism over its move to cancel $10,000 in student debt per borrower. Roughly 59% of Americans are concerned that student debt cancellation “will make inflation worse,” according to a new survey from CNBC. While 30% said that no student debt cancellation should occur, only 19% of adults between 18 and 34 years old maintain such a position.