(Yahoo!Finance) - More than 2 in 5 (44%) Americans believe we’re in a recession now or will be by the end of this month, a new survey found, while three-quarters expect a downturn in the economy by the end of the year.
A large share (57%), though, remain optimistic about their own household finances for the next 12 months — despite those recession fears — the highest level since the fourth quarter of 2021, according to a new survey of 3,000 US adults from TransUnion.
The seemingly contradictory feelings reflect how many households remain bothered by higher prices and elevated interest rates eating into their budgets, but a still-robust job market has allowed many to keep up for the near term.
“People are in a recession state of mind,” Charlie Wise, senior vice president and global head of research and consulting at TransUnion, told Yahoo Finance. “Yet a majority of consumers say they are feeling optimistic and expect higher personal incomes. It’s a strange type of conflicting forces.”
The survey, fielded between April 25 and May 9 also revealed that for the sixth consecutive quarter, consumers cited inflation as causing the most anxiety.
Overall, 79% of respondents said inflation was a top worry, outranking fears of a recession (53%). This was followed by concerns over increasing prices on rent or mortgage (45%), and rising interest rates (41%), TransUnion found.
“We are living in uncharted territory from a consumer credit perspective,” Wise said in a statement. “The combination of rising interest rates and elevated inflation, while not uncommon from a historical perspective, is an unfamiliar experience for many consumers.”
Buffering those concerns has been the consistently strong labor market, according to Wise. Last week, the Bureau of Labor Statistics reported the US economy added 339,000 nonfarm payroll jobs in May, well above what was expected and the 14th straight month job creation topped economist forecasts.
Still, that doesn’t mean that could change – as some industries experience layoffs.
“Small numbers add up to big numbers eventually,” Wise said. “I think the Federal Reserve is aiming for at least a little bit of a job slowdown and in the long run – recessions happen because the economy every so often – 5 to 10 years – needs a reset.”
“Hopefully, this reset will be quick and as relatively painless as possible before we hit that accelerator pedal again,” he added.
Generational divide
Among generations, baby boomers and Gen Xers are more likely to expect to be financially worse off than younger adults over the next 12 months. While 73% of Gen Z and 69% of millennials said they felt optimistic about their household finances in the second quarter, compared with Gen X (51%) and boomers (41%).
Gen Z and millennials expect their incomes to rise over the next year, at 68% and 88%, respectively. Older generations, not so much. Just 46% of Gen X and 27% of baby boomers surveyed believed their wages would increase in the next 12 months.
According to Wise, the workers who benefited the most from wage gains over the pandemic were mostly lower-income and younger generations as they job-hopped, at times getting a 10% or even 20% wage increase while the job market was hot.
“These are consumers whose wages very likely kept up with or surpassed inflation and their confidence hasn’t been flattened to the same degree as older consumers who are likely seeing more stagnant wages,” Wise told Yahoo Finance.
Overall, 46% of consumers thought their incomes were not keeping up with the pace of inflation for groceries, gas, and shelter. But baby boomers and Gen Xers were having the hardest time weathering those higher prices.
Approximately 89% of boomers cited that inflation was their top financial concern, followed by 82% of Gen X. This was followed by millennials and Gen Z, with 73% and 68% saying they were anxious about inflation.
“A lot of baby boomers are retired, close to retirement, or they’re on fixed income. They’re not going to walk across the street for another job. These are consumers who are seeing gas and food prices more expensive,” Wise said. “For many, it may feel like a personal recession.”
Gabriella Cruz-Martinez · Personal Finance Writer
