Consumer Perspectives on the Economy

Thursday June 27, 2024  |  Bill Handel, General Manager and Chief Economist

Are we in a recession? Are we likely to have a recession, if we are not in one currently? The answer to these questions depends on whom you ask. If you ask economists, they clearly don’t believe we are in a recession, and they are also increasingly disinclined to believe one is in the offing. In fact, a recent survey of economists indicated that none believe we are in a recession now and fewer than three in 10 believe we will have a recession within the next year. Many believe the Federal Reserve is increasingly likely to navigate to a soft landing, in which we reduce inflation rates to the desired 2 percent range without triggering a recession.

However, if you are not an economist, your perspective may be different. Raddon recently conducted a consumer survey of 1,500 individuals from across the U.S. and across all age and income groups to get a better sense of how they view economic conditions. The results were nothing if not startling.

First, let’s establish something important. What recession means to an economist and what it means to the average person can be two very different things. While there is no technical definition, economists usually refer to sustained declines in overall economic output (gross domestic product, or GDP) as the indicator of recession. Generally, two consecutive declines in quarterly GDP growth have been the de facto standard of recession, although this is not always the case. The first two quarters of 2022 both showed negative GDP growth, and yet this was not deemed a recession.

To an individual not trained in economics, recession may mean something very different. Very often, it is a reflection of the state of their own economic circumstances, or the perception of others’ financial circumstances, that will lead them to concur that we are in a recession. In other words, “If I feel bad about my finances, or I think others are suffering financially, then we must be in a recession.”

So from an economist’s perspective, how has the economy performed recently? An examination of the actual recent quarterly growth in GDP illustrates that recent growth has slowed but continues to be positive. 

Figure 1: Change in GI 

By Economic Measures, We Are Not in a Recession… However The Economy is Slowing Down

Source: U.S. Bureau of Economic Analysis

Over the last several years, GDP growth has exceeded the average since 1980 (+2.6 percent) in some quarters and fallen short in other quarters, including two negative quarters in 2022. Growth in the first quarter of 2024 was 1.3 percent, half of the long-term trend but still positive. Clearly, by most economic measures, we are not in a recession, although the economy clearly is slowing.

However, the perspective of consumers is different. According to our recent poll, 57 percent of consumers nationwide believe we are in a recession right now – 36 percent think we are in a long-term recession and 21 percent believe we are in a recession currently but will be out soon. An additional 21 percent believe that while we are not in a recession now, we will be in a recession soon. Only 22 percent think we are not in a recession and not likely to be in one soon. Contrast this with the seven in 10 economists who believe this to be the case.

Figure 2: Younger Generations More Likely to Perceive That We Are in a Recession

Almost Three In Five Consumers Believe We Are in a Recession Now

Source: Raddon survey of 1,500 nationwide consumers, April 2024

What causes such wide disparity between the generally optimistic view of economists and the very negative view of consumers?

One factor that may play a role is the news cycle. Without a doubt, the spate of high-profile announcements of layoffs at some fairly large employers may have had an impact on consumer perception.

What is also clear is that the perception of the state of the economy is not consistent across all demographic groups. Age also has a very strong bearing on the belief that we are in a recession, with younger individuals likely to feel much more strongly that we are in a recession.

Figure 3: Recession Perception by Generational Segments

Percentage Who Believes We Are Currently in a Recession

Source: Raddon survey of 1,500 nationwide consumers, April 2024

There is also a correlation between perception and household income levels, with lower income households more likely to feel that we are in a recession. However, the correlation with income is not nearly as strong as it is with the generational segments.

Figure 4: Recession Perception by Household Income

Percentage Who Believes We Are Currently in a Recession

Source: Raddon survey of 1,500 nationwide consumers, April 2024

In other words, the lower one’s level of income and the younger one is, the more likely one is to believe we are in recession.

What are the factors behind this perception that we are in a recession? First, remember that consumers are not likely to identify a recession based on an economist’s definition – a sustained decline in GDP. Their perspective is likely based on the perceived economic trajectory for themselves or for others. On this basis, we would suggest that there are several different issues that are leading consumers – especially younger and lower income consumers – to feel that the trajectory of the economy is not good. We will discuss four of them here.


1.       Level of Current Savings

One factor that we might assume would correlate with the level of financial concern someone has would be their current level of savings. We asked respondents to provide their aggregate levels of savings and investments, including retirement savings, and looked for correlations in terms of their view on the shape of the economy. Level of savings was one of the strongest correlations we saw in the data.

Figure 5: Recession Perception by Household Deposits and Investments

Percentage Who Believes We Are Currently in a Recession

Source: Raddon survey of 1,500 nationwide consumers, April 2024

Individuals with less than $25,000 in aggregate savings and investments were twice as likely to believe we were in a recession than were those with over $1 million in savings and investments. Why is this? We can posit several answers. First, those with little savings and investments are likely to feel more precarious in regard to their financial situation, and this feeling is likely to result in a negative view of the country’s economic trajectory.

But the second factor is probably more significant – the wealth effect. With larger savings and investment balances comes larger returns from a reasonably well-performing stock market. This wealth effect is a well-known phenomenon, and the strong performance of the market over the past several years makes this more pronounced. However, it is something that can reverse itself in a hurry when market performance begins to deteriorate, as it has in the most recent period.

2.     Inflation

A second factor worth exploration is the impact of inflation. In our survey, we asked respondents to rate the impact of inflation on them from 1 (“I understand there is inflation, but it has not impacted me at all”) to 10 (“Inflation has impacted me significantly”). We then constructed an inflation net impact score by subtracting the percentage who rated inflation’s impact as an 8 through 10 (substantially bad) from those who rated inflation’s impact as a 1 through 3 (relatively benign). 

Figure 6: Inflation Net Impact Score

Inflation is Disproportionately Impacting Younger and Lower Income

Source: Raddon survey of 1,500 nationwide consumers, April 2024

For all households, 7 percent considered inflation fairly benign (score of 1–3), while 48 percent considered inflation pernicious (score of 8–10). Thus the score of -41 for all households.

Note that for all groups, the inflation net impact score was negative, indicating that for every group, inflation was a significant issue – more respondents considered it to be a significant problem than considered it to be a trivial issue. However, we also see that there is strong correlation between perception and both age and income, with younger as well as lower income households much more likely to perceive inflation as a significant issue. This may be due to past experience; Baby Boomers and older generations are more likely to have a clear memory of the 1970s and 1980s, when inflation was much higher than it has been recently. If you have lower levels of income, then rising prices are likely to be more impactful.

There also was a clear correlation between household savings and the view of inflation. Those with under $25,000 in aggregate savings and investments had an inflation net impact score of -54, while those with over $1 million in balances had a score of -9. Clearly a case of the wealth impact at play – “If I have more resources, the impact of rising prices is less significant.”

So does the perception of inflation correlate with recessionary concerns? The answer is absolutely yes, as seen in the chart below.

Figure 7: Inflation Net Impact Score

Perception of Inflation Net Impact Score


Source: Raddon survey of 1,500 nationwide consumers, April 2024

Those who believe we are in a long-term recession also indicated, by far, the greatest concern with inflation, while those who don’t think we are in a recession have relatively modest concerns over inflation. In other words, for many consumers, the notion of reduced spending power due to higher rates of inflation may be the recessionary impact that they perceive.

3.     Expanding Debt

The macroeconomic data show a significant level of post-pandemic growth in all categories of consumer debt, including real estate debt. In the immediate period following the onset of COVID-19, we actually experienced declines in aggregate debt levels, especially in credit cards, due to both cash infusions from the federal government and a shuttered economy (we couldn’t spend). However, since that point in time we have seen significant growth in many debt categories. The chart below shows the actual debt per adult in the U.S. since 2006.

Figure 8: Total Debt Per Adult

Debt Levels Are Rising Substantially

Source: Federal Reserve; U.S. Bureau of Labor Statistics; Raddon calculations

The chart illustrates that there has been a significant level of consumer debt growth after the pandemic, driven by three categories – mortgages, auto loans and credit cards. In fact, during the past three years, credit card debt per adult has increased by 34 percent, auto loan debt by 22 percent and mortgage debt by 17 percent. Only student loan debt did not grow, and this was due primarily to forbearance programs.

Not surprisingly, there are indications of increasing levels of stress in the consumer lending categories. A recent report by the Federal Reserve Bank of New York’s Consumer Credit Panel and Equifax illustrates an alarming trend in credit cards.

Figure 9: Credit Card Borrower Utilization Rate

Maxed-Out Credit Card Borrowers See Increasing Delinquency

* The chart shows balance-weighted transition to credit card delinquency among borrowers who were current on all credit card accounts in the previous quarter. A borrower’s utilization group is determined by their utilization in the previous quarter. Data are smoothed as four-quarter moving sums, to account for seasonal trends.

Source: Federal Reserve Bank of New York Consumer Credit Panel; Equifax

What this chart clearly shows is that those individuals who are considered maxed-out (90–100 percent utilization rate) are seeing a pronounced increase in delinquency. As of the first quarter of 2024, this group represented 18 percent of borrowers, according to the Federal Reserve Bank of New York. Clearly, there is stress in the consumer lending markets, especially at the low end.

What do consumers tell us about their concerns with their level of debt? First, 27 percent indicated they have taken on “somewhat” or “significantly” more debt in the last three years, while 30 percent say they have “somewhat” or “significantly” reduced their level of debt. The remainder either don’t have debt or have not changed their level of debt over the past three years.

However, when we look at this data by generational segments, we begin to see some differences. Interestingly, it is the Gex X group that is most likely to indicate an increase in their debt levels (32 percent). This may not be all that surprising, because this group is facing significant milestones, such as funding a child’s college education, at this point in their lives.

Figure 10: Consumers Have Taken on More Debt in Last 3 Years

Household Income Levels Affect Debt Accrued in The Last 3 Years

Source: Raddon survey of 1,500 nationwide consumers, April 2024

However, a much stronger degree of correlation can be seen between perception and the level of household balances. The divide is seen at approximtely $100,000 of total balances. For those with less than $100,000 in balances, the percentage who increased their level of debt in the last three years was 34 percent. In contrast, for those with more than $100,00 in aggregate balances, the percentage indicating an increase in debt was only 19 percent.

Does the change in debt level over the past three years correlate with the perception that we are in a recession? The answer is clearly yes. Of those who have no debt, only 45 percent believe that we are in a recession. In contrast, for those individuals who have seen an increase in debt levels over the past three years, the percentage who believe we are in a recession is 68 percent.

Figure 11: Percentage of Levels of Debt Compared to Perception of Recession

The More a Consumer Has Recently Taken on Debt, The More They Believe We Are in a Current Recession

Source: Raddon survey of 1,500 nationwide consumers, April 2024

4.     Home Affordabilty

The final factor to consider is the housing market. The significant increase in interest rates over the last two years has had two major impacts:

·         Sellers have less incentive to sell, since doing so will often result in their having to finance their next home at much higher mortgage rates than they have currently; this reluctance to sell reduces the available stock of inventory and results in home prices remaining relatively high

·         Home purchasing power has been significantly reduced by higher rates and high home values, and potential home buyers, especially first-time buyers, are not able to find homes to purchase

The result of these two factors is the worst home affordability since the 1980s, when interest rates were in the double digits. Another result is a relatively stagnant home sales market – not quite as low as in the aftermath of the financial crisis, but significantly low nonetheless. This is particularly impactful for Millennials – especially younger Millennials – who have not purchased yet, and for Gen Z, a few of whom are beginning to look at the idea of homeownership.

In fact, our research shows a degree of despair regarding potential homeownership among those who are not current homeowners. We asked whether participants agreed with the statement, “I will never be able to afford a new or different house.” Shown below are the percentages of those who either “somewhat” or “strongly” agreed with this statement.

Figure 12: Percentage of Overall Current and Non-Homeowners on Perception of Being Able to Afford a First or New Home

More Than 50% of Non-Homeowners Believe They Will Never Be Able to Afford a House

Source: Raddon survey of 1,500 nationwide consumers, April 2024

High interest rates and high home prices have impacted the belief in the achievability of homeownership. One in three current homeowners believes it will not be possible to afford a different home, but more tellingly, those who are not homeowners – 37 percent of survey respondents – are even less likely to think they will be able to be homeowners in the future. More than half (51 percent) agree “somewhat” or “strongly” with this statement.

Further evidence of the possible calcification of the residential real estate market is seen in the percentage of current homeowners who plan to stay in their current home due to high interest rates. Almost two in three homeowners indicated some level of agreement with the statement, “I plan to remain in my current house because I don’t want to give up my low-interest-rate mortgage.”

Figure 13: Percentage of Overall Consumers Who Plan to Remain In Current Home

Majority of Consumers Plan to Remain in their Current Home Due to Current Low Interest Rate


Source: Raddon survey of 1,500 nationwide consumers, April 2024

In theory, rising mortgage rates should result in downward pressure on home prices in order to maintain a level of home affordability. But the unwillingness of current homeowners to sell their homes reduces the availability of homes for sale. This low availability keeps home prices at elevated levels and further reduces home affordability. This scenario is not likely to change until we see significant reductions in mortgage interest rates.


This national survey of consumers is telling for several reasons. First, what is clear is that there is a disconnect between professional economists and the average consumer in regard to the state of the economy. Economists are generally optimistic about the current state of the economy and think there is a strong possibility of avoiding recession. Consumers, on the other hand, are likely to perceive that we are already in a recession, which many view as a long-term recession. The reasons for these differences seem to be clear from this research: inadequate savings, rising debt levels, inflation concerns and home affordability. In other words, for the typical consumer, the notion of recession is a personal issue, not a macroeconomic one.

Whether we move into a recession at some point is unknown. It is possible we may avoid an actual recession, and the Federal Reserve could achieve its desired soft landing. However, what seems to be clear is that we are, with apologies to Charles Dickens, in a tale of two economies. Older individuals who have avoided the lure of debt and built savings and investment balances are feeling reasonably good about the state of things. Younger individuals who have not had a lifetime to save are not feeling as good.

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