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Are we in a recession right now?
That’s what everyone is wondering after the Bureau of Economic Analysis reported that US gross domestic product (GDP) fell for the second consecutive quarter. GDP, which measures the value of a country’s economy, fell 0.9% in the second quarter of 2022 after falling 1.6% in the first quarter of the year.
While two quarters of negative growth have traditionally signaled a recession, continued strength in the labor market may be enough to prevent the National Bureau of Economic Research from declaring the United States has entered a recession. The US economy added 372,000 jobs in June, according to the Bureau of Labor Statistics (BLS).
All of this could be cold comfort to Americans who are increasingly worried about their job security. The latest Forbes Advisor-Ipsos Consumer Confidence Biweekly Tracker reveals that more than 40% of respondents think they or someone they know will lose their job in the next six months.
The survey, conducted by Ipsos, measures consumer sentiment over time.
Two in five Americans think job losses are imminent
The latest survey reveals that consumer confidence remains stable, but Americans’ perception of their job security is increasingly fragile. The number of people who think they, a family member or a personal acquaintance will lose their job in the next six months due to economic hardship has increased by six percentage points over the past two weeks.
If this trend continues, consumer spending could decline. “If you think your revenue stream is in jeopardy, you’re going to rethink your spending,” says Christopher Maher, president and CEO of OceanFirst Bank, headquartered in New Jersey.
When broken down by age, people aged 18-34 are the most pessimistic about job prospects (56 points out of a possible 100 this week, down from 62 points two weeks ago), which gauges job confidence. respondents regarding job security, experience of job loss and overall job prospects. Those aged 35 to 54 are much more optimistic (66 points).
It’s no surprise that young adults are most wary of the job market, according to Bert Bean, CEO of recruiting solutions company Insight Global. “Who can blame them? he says. “That age has struggled.” Some lost jobs in the 2008 recession, only to find themselves laid off in 2020 due to the pandemic.
However, Bean says the labor market may not be as bad as they fear. “We are still seeing hiring; we’re still seeing growth,” he says, noting that Insight Global has seen about 1,000 new placements per week recently.
Nationally, the unemployment rate has held steady at 3.6% for the past four months, according to the BLS. That compares to a rate of 5.9% a year ago. Among the main employment sectors, professional and business services experienced the strongest growth with the addition of 74,000 jobs in June.
At a press conference on July 28, Treasury Secretary Janet Yellen highlighted the unusual strength of the current labor market, saying that for every unemployed American there are two vacancies. She also noted that the economy is currently not showing the usual indicators of a recession, despite declining GDP data.
Could the latest interest rate hike shake consumer confidence?
While job confidence has declined, the consumer outlook has held steady in recent weeks and stands at 48.8 points on a 100-point scale.
“After two months of volatility, this week’s Ipsos-Forbes Consumer Confidence survey finds stability in consumer sentiment,” said James Diamond of Ipsos. “However, he remains below 50 points for the fourth consecutive reading, his longest streak since the summer of 2020.”
The survey predates a Fed rate hike that was announced on July 27 – the fourth hike of 2022 – so it does not reflect any change in consumer confidence that may have occurred following the hike.
Even if consumer confidence is shaken, that won’t necessarily translate into a slowdown in spending, according to Maher. “It’s a strange time,” he says. “People say they’re worried (about the economy), but it doesn’t show in their spending.”
On the contrary, Maher says OceanFirst Bank’s card data shows that spending in discretionary categories such as travel and dining remains strong, although there has been a shift towards cheaper alternatives for shopping. ‘grocery.
In an interview with Fortune, Visa Chief Financial Officer Vasant Prabhu noted that consumer spending is roughly in line with levels seen in 2019. However, there has been a shift from buying goods to shopping. buying experiences, such as travel and entertainment. This was also seen in the Deloitte State of the Consumer Tracker, which found that consumer spending on services increased for the 15th consecutive month in May 2022.
Consumers continue to feel uncomfortable making major purchases
Two-thirds of respondents in the Forbes-Ipsos survey say they are less comfortable making major purchases now, such as a house or car, than they were six months ago. Rising interest rates and inflation may contribute to this malaise.
“We find that home equity (loans) is an area where people are cautious,” Maher said. With interest rates rising, he says, people seem less inclined to take on real estate projects that they would normally finance with equity in their homes.
While Maher says he hasn’t seen a slowdown in auto sales, other data paints a different picture. According to MarkLines, which provides data on the auto industry, new car sales in the United States increased by 2.8% from May to June 2022, but overall sales fell by 12%.
The future of consumer confidence and spending could be tied to job security, and Bean has some good news to share on that front.
“We’ve had a solid year in terms of getting people to work,” he says. “It’s nothing like 2009 or 2020.”
Survey methodology: Ipsos, which polled 941 respondents online on July 25-26, 2022, provided the results exclusively to Forbes Advisor. The survey is conducted weekly to track consumer sentiment over time, using a series of 11 questions to determine whether consumers have a positive or negative view of the current state of the economy and the future. .