If the economy isn’t bad, why does it feel like it is?

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Experts say they see no sign of a recession on the horizon

The March employment report was something of a shock. In spite of recent high-profile layoffs, the economy added 303,000 jobs and the unemployment rate remained at 3.8%.

It was a shock because, if you ask some consumers, it feels like we’re in a recession. But none of the four financial experts we consulted agree. In fact, most don’t see an economic slowdown on the horizon.

Noah Yosif, chief economist at the American Staffing Association, says the layoffs in the news are a result of higher business costs, driven by interest rates, that are not afflicting all segments of the economy equally. 

“Layoffs remain low overall, sustaining the labor market's continued resilience and the likelihood of avoiding a recession,” Yosif told ConsumerAffairs. “When workers earn a paycheck, they maintain their ability to be consumers and contribute to economic activity.”

Companies are still hiring

Phillip Sprehe, an economist and labor market analyst at Geographic Solutions, says not only are we not in a recession, but it’s unlikely one will occur for at least the next six months.

“According to data across Geographic Solutions client systems, job openings have steadily declined by four million since the inflation rate peaked in mid-2022. Despite this, employment growth has been unexpectedly strong, indicating that these job openings have been filled rather than removed,” he told us.

Sprehe also points to year-over-year real GDP growth of 3.1% in the fourth quarter of last year. He notes that – with the exception of the pandemic lockdown in 2020 – the last time a recession occurred within six months after reporting growth of more than 3% was in 1981.

"I don't see a recession on the horizon,” said Joseph Camberato CEO at NationalBusinessCapital.com. “The recent layoffs we're seeing are pretty standard fare – mostly from bigger companies that went overboard with hiring during COVID, or tech firms that expanded too quickly and now can't keep up. Some of these companies have also automated processes with AI, so they don't need as many staff as before.”

Camberato says plenty of companies are still hiring and investing in growth. He says construction is a prime example, with year-over-year growth increasing by 39% in January.

Here's where the pain is

“Barring any unforeseen shocks, it is difficult to expect a recession when the labor market remains strong and consumer spending continues at a brisk pace,” said Stephen Kates, principal financial analyst at Annuity.org. “While much has been made of price increases and growing household debt, the truth is that household debt as a percentage of disposable income is at a multi-decade low.” 

If these analysts are correct, why do so many people feel like the economy is so bad? Kates says it’s not a recession causing consumer angst, but inflation.

“The 20%, and counting, cumulative inflation since 2020 is a major factor,” he told us. “It is hard not to feel uncomfortable with prices rising quickly over a short period of time, especially on items that you can easily remember being lower cost only recently such as groceries. Additionally, negative news plays well to peoples concerns over economic catastrophe.”

Kates notes that while many consumers complain about rising prices, they may have benefited from recent wage increases, which of course, contributes to rising prices.

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