The early months of the COVID-19 pandemic saw a stock market crash, a unprecedented increase in layoffs and what turned out to be full-fledged, two month recession. More than two years later, a booming job market has been overshadowed by inflation, and an even larger share of voters now believe the U.S. economy is currently in a recession, according to a new Morning Consult/Politico survey.
Economists warn of ‘self-fulfilling prophecy’ of a recession
Historically low unemployment rates and healthy profits for business have been unable to get Americans to reject the idea of a lagging economy. The reports of a declining gross domestic product — and, perhaps more importantly to voters, a meteoric rise in the cost of goods — have plagued the economy in recent weeks. Major retailers are also waving warning flags on the rise in the value of the US dollara threat to sales of American products.
Some regulators and economists have expressed concerns that perceptions of the recession could create the conditions necessary to talk about a slowdown. Robert Shiller last week put the odds of a recession at 50%, but the famed Nobel Prize-winning economist also said he believed it could become a “self-fulfilling prophecy”. Commerce Secretary Gina Raimondo recently touted the strength of the US economy, but warned that the public should not “go into a recession”.
All eyes are on the release of upcoming Consumer Price Index numbers on Wednesday, as well as Federal Reserve actions at its July meeting. The central bank faces a decision between voting for a less aggressive rate hike, which could allay fears that a rate hike will actually cause an economic slowdown, or whether it should try to curbing consumer psychology and “break the inflationary mentality” with another 75 basis point interest rate hike.
March 27-29, 2020 investigationand the July 8-10, 2022 survey were each conducted among a representative sample of approximately 2,000 registered voters, with an unweighted margin of error of plus or minus 2 percentage points.