[Survey] 72% of Americans Fear a Recession is on the Horizon; Up from 53% in December

In December of 2019, FinanceBuzz surveyed 1,200 U.S. adults to see how Americans felt about the state of the economy and their own finances. In the last three months, a lot has changed in the world, most notably due to the spread of the coronavirus, which has already taken thousands of lives and threatens to take many more.

FinanceBuzz decided to re-ask the same questions to assess how consumer sentiment has changed since December.

This research revealed that Americans have become both less optimistic about the country's financial future as well as increasingly concerned about their own financial outlook. Fears of both a recession and potential job losses have increased substantially — and perhaps understandably since the coronavirus, COVID-19, has been declared a worldwide pandemic.

Here are the key findings from the survey demonstrating the sharp increase in financial concerns among Americans.

Key findings:

• Recession fears are growing: 72% of Americans are worried about a recession happening within the next year, up from 53% who made this claim in December 2019.
• Americans are also changing how they prepare for a recession. Only 10% are focused on paying down high-interest debt (compared to 16% in December) while 33% are now cutting expenses (compared to 25% in December).
• 35% are now worried about layoffs and job losses, a concern that’s increased from 26% in December.
• Americans are also losing hope for their families. 24% are “not optimistic at all” about their financial futures — a number that’s increased from 17% in December 2019.

Recession worries are growing… a lot

A growing number of Americans have expressed concern about an economic downturn in 2020. In fact, the number of survey respondents fearful of a recession this year jumped from 53% in December 2019 to 72% in March 2020.

This reflects a 36% increase in the number of Americans concerned economic growth will slow. The increasing fear that the country's GDP will decline is justified in light of predictions from financial experts about the dire impact of the coronavirus and social distancing measures.

Americans are also taking a different view of how a likely recession could impact their personal financial situation. Although fear of rising prices still remains a top concern, just 37% of March survey respondents cited this as their biggest worry about a 2020 economic downturn, down from 41% in December.

Fear of a layoff or job loss has replaced inflationary concerns for a substantial number of survey respondents. In fact, 35% of March respondents listed fear of job loss as their chief worry about a recession compared with 26% in December. Even with these changes, Americans still may be underestimating potential increases in unemployment as businesses across the country are forced to shut down, demand falls sharply in the travel and tourism industry, and professional sports remain suspended indefinitely.

Recession preparation has shifted to more short-term solutions

As the threat of a looming recession becomes a more widespread concern, Americans are changing their approach to preparing for an economic downturn.

Long-term plans such as paying down debt were a popular option in December, with 16% of survey respondents indicating this was their priority in preparing for a recession. Now, just 10% of survey respondents are focused on debt repayment, while the number of Americans indicating they'll be cutting expenses jumped from 25% in December to 33% in March.

While debt repayment can provide financial relief in the long-term by reducing interest costs and eventually eliminating a payment, debt reduction isn't as helpful for weathering short-term economic storms. Until the debt is fully repaid, consumers continue to have minimum monthly payments to make. And any extra funds sent to creditors reduce the long-term cost of debt repayment but will be unable to be used for more pressing needs if job loss or rising prices occur during a 2020 recession.

Reducing expenses, on the other hand, frees up cash to use immediately, making budgeting easier for Americans if hours have been cut or living on unemployment benefits becomes necessary.

March survey respondents were also far more likely to delay large purchases, with 20% indicating they would wait due to fears of economic downturn compared with just 15% in December. Large purchases also deplete cash reserves that could be important if a recession results in a job loss or rising prices.

Optimism is also plummeting

In December of 2019, the majority of Americans were somewhat or very optimistic about their financial future, with just 17% of survey respondents indicating they felt no optimism at all. In March, optimism had dropped significantly, with almost a quarter of Americans (24%) indicating they were no longer optimistic.

With some reports indicating social distancing and widespread business closures could last for months, there is justification for the feeling the future is less than hopeful. Americans invested in the stock market, millions of whom have watched their portfolio balance drop dramatically in recent weeks, are also likely not feeling very cheerful about their financial future.

Political uncertainty is growing

Political uncertainty is another factor that's likely contributing to a decline in optimism, along with coronavirus concerns. In fact, a growing number of people are planning to postpone major financial decisions until after the 2020 presidential election. 38% of Americans are now delaying important life choices until after the election, up from 32% in December.

The decisions most often being postponed include purchasing a home, changing jobs, opening a new credit card, or having children. Most of these choices have a long-term financial impact so it is understandable that survey respondents want to know more about the direction of the country before making major personal and financial commitments.

3 things you can do today to prepare for recession

Americans fearing an economic downtown can take steps today to be better prepared for a recession. These include: 

• Reducing expenses to build an emergency fund: You should have an emergency fund saved in an accessible savings account to cover three to six months of living expenses. If you're fearful of a prolonged recession and concerned about job loss, aim for a larger fund. To help build that fund you look at reducing expenses and learn more about how to manage your money.
• Learning new skills. Most Americans are practicing social distancing in an effort to slow the spread of COVID-19. Consider using this time to learn skills that could increase your earnings or help you land a new job if you’re faced with long-term unemployment.
• Keep investing. The stock market has experienced substantial volatility recently as markets absorb the news of the coronavirus pandemic. However, history shows that markets recover and stabilize, even from major economic events such as the 2008 recession. You should avoid taking money out of investment accounts in most cases and should continue regularly investing rather than trying to time the market and losing out on the recovery.

Methodology

FinanceBuzz surveyed 1,200 U.S. adults (ages 18+) on December 20, 2019 and again on March 17, 2020. Both surveys were conducted using the Pollfish platform. The respondents were not the same across the surveys.