Recent research reveals a surprising disconnect between public perception and economic reality, with three in five Americans mistakenly believing the U.S. is currently in a recession. Despite the economy’s performance, which has not shown a recessionary trend since early 2020, many cite personal financial difficulties and economic uncertainty as reasons for their belief.
Survey Insights
A survey sponsored by Affirm (AFRM) indicates that inflation and cost of living pressures are major factors driving the misconception of an ongoing recession. Respondents pointed to financial struggles among family and friends, reduced spending, and credit card debt as key influences on their perception.
On average, participants in the survey believe the recession began in March 2023 and expect it to continue for another year. Nearly 70% reported that inflation is impacting their financial planning, including savings and purchasing decisions.
Economic Reality vs. Public Perception
According to the National Bureau of Economic Research (NBER), the U.S. has not been in a recession since the early days of the Covid-19 pandemic. The NBER defines a recession as a significant, widespread decline in economic activity lasting more than a few months.
Recent data shows that the U.S. economy grew at an annualized rate of 2.8% in the second quarter, a notable improvement from the 1.4% growth in the first quarter. This growth surpasses economists’ expectations and indicates economic resilience.
Factors Contributing to Economic Anxiety
Despite positive GDP growth, inflation has increased the cost of living by over 21% since 2020, according to the Consumer Price Index. Additionally, other economic indicators suggest a slowdown. The Bureau of Labor Statistics reported a lower-than-expected job increase in July and a rise in the unemployment rate to 4.3%, the highest since 2021. This uptick in unemployment has triggered the Sahm Rule, a historically reliable recession indicator.
Further complicating perceptions, recent government data shows a decline in consumer confidence and a dip in current economic sentiment to a three-year low. However, future expectations are more optimistic, with many consumers anticipating better conditions ahead.
Justin Begley of Moody’s Analytics notes that while consumer expectations for the near term are cautious, ongoing shifts in spending and investment behavior may affect economic growth. Past indicators of recession have often proved inaccurate, suggesting that current fears may not fully align with economic fundamentals.
