Is recession talk a self-fulfilling prophecy?
There have been quite a few economic signs forecasting a recession lately — global growth and business confidence are down, there’s a trade war and the yield curve has inverted. And a lot of news coverage lately has been focused on the possibility of an impending recession. Meanwhile, unemployment is low, consumer spending remains high and the White House has been saying that everything is fine. Could all this dire economic talk spook consumers into spending less, and push us into a recession?
Kelli Lanier, a behavioral economist at Emory University, said it’s certainly possible because of a psychological term known as the availability heuristic.
“If you’ve just watched the movie “Jaws,” then you might be less likely to go swimming in the ocean than someone who has not seen the movie or has not seen it in several years,” explained Lanier.
Basically, the more we hear something, the more we think about it. So, negative economic news in theory could hurt consumer spending. But the news isn’t all negative right now.
“At one moment, they hear new about wage increases and the strong labor market and other times they hear news about the trade disputes and the markets coming down,” said Bart Van Ark, chief economist at the Conference Board.
If anything, consumers are probably a little confused. So, we chatted with some Marketplace listeners to see if they’re concerned about a possible impending recession.
Vinay Kumar
Age: 25
Location: Phoenix, Arizona
Profession: Mechanical Engineer
Concerns: A recession would bring Kumar “a mixed bag of emotions.”
He sees opportunity when stock prices go down and said that a low stock price doesn’t necessarily reflect a company’s worth in a recession.
“That could give me an opportunity to buy a good company’s stock at a lower price,” Kumar said. “But then in the microeconomy kind of view, everything gets more expensive and living costs go up and there’s a possibility for job loss.”
Kumar said he would have to balance the short-term costs with long-term payoffs. He was a teenager during the 2008 recession, and said his dad almost lost his job.
“He took a transfer to another city, and eventually we got back on our feet,” Kumar said. “But that was a sketchy time for us.” And while he feels stable in his job at a startup, he said, “anything can happen.”
Conor Giard
Age: 35
Location: Burlington, Vermont
Profession: General manager of a craft beer distributor
Concerns: Giard isn’t particularly concerned about a recession, as he’s in what he calls a “recession resistant industry” — beer distribution.
“People drink when times are good, they drink when times are bad,” he said. “The economy just determines where they do their drinking.”
He got into the business in 2007, so he’s already been through one recession. “I’ve never known anything but explosive growth in this industry,” he said.
He does have quite a bit of money tied up in a 401(k), but isn’t too concerned about economic instability. In just the past couple of months, he and his wife bought a house and two new cars.
“Because of my job, we’re not really so worried about it,” Giard said. “You can see it evidenced in those decisions.”
Jess Hornsby
Age: 49
Location: St. Petersburg, Florida
Profession: Project manager for an environmental testing laboratory
Concerns: Hornsby is concerned about how a recession could affect her 401(k), especially when thinking about retirement.
“As I grow older, I get more concerned with the amount of time I have to save for a comfortable retirement,” Hornsby said. “Our family can weather stiffer lending practices or price increases that come with a recession, but it is much more challenging to catch up our retirement savings.”
She also said she’s not concerned about missing a small raise in the face of a recession because her buying power hasn’t really increased throughout the recovery.
“We aren’t buying better cars or home furnishings, or taking lavish vacations or even traveling to see friends and family more often,” Hornsby said.
Charles Eubanks
Age: 76
Location: Brookyln, New York
Profession: Retired librarian
Concerns: Eubanks isn’t too concerned about a recession.
“I do not react much when I hear recession, because it’s not a matter of if, but when,” Eubanks said. And he might be right.
He is, however, worried about the response to one.
“The prevailing view in the government appears to be that by pretending that a recession won’t happen, it won’t happen,” Eubanks said.
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