Looming Recession Has Consumers On Edge. Here’s What They Are Most Worried About

Leadership Strategy Looming Recession Has Consumers On Edge. Here’s What They Are Most Worried About Gary Drenik Contributor Opinions expressed by Forbes Contributors are their own. Following New! Follow this author to stay notified about their latest stories.

Got it! Oct 31, 2022, 10:00am EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin inflation worries AdobeStock_519100265 With rising inflation and continued interest rate hikes, 76% of Americans rate the condition of U. S. economy as ‘poor’ or ‘fair’ according to a recent Agency Forward survey from Nationwide.

Ahead of the latest Fed interest rate increase, 68% of consumers expected rates to rise in the coming months. And when thinking about their personal finances, roughly 3 in 4 (77%) consumers are ‘moderately’ or ‘very’ concerned about inflation and increased costs of living. Nationwide President, P&C Personal Lines Beth Riczko met with me to discuss the findings, what these economic pressures mean for consumers’ personal finances, as well as consumer habits with a possible recession on the horizon.

Gary Drenik: Where do consumers stand on the present economic environment? Beth Riczko: Almost daily there’s a new headline about the state of the economy and how it’s impacting consumers, and Americans are understandably worried. Many consumers have a bleak outlook on current economic conditions and aren’t confident in signs of relief in the near term. According to a recent Prosper Insights & Analytics Survey, in total, 32% of consumers feel confident, while 68% feel little, to no confidence.

Combine that with our Nationwide data which reveals that consumers expect interest rates to continue climbing while their personal finances and mental wellbeing hang in the balance. While more than half (53%) said their personal finance situation is ‘poor’ or ‘fair,’ it’s leaving 51% saying their mental health has been negatively impacted due to their concerns about the current environment. Prosper – Consumer Confidence October 2022 Prosper Insights & Analytics MORE FOR YOU $100M Magic: Why Bruno Mars And Other Stars Are Ditching Their Managers Office Vacancy Story Reversed In Some Smaller Southeastern Markets A “Farm Powered” Business Model For Scalable Renewable Energy Production From Waste Drenik: What are they doing to prepare if we enter a recession as many predict? Riczko: Most Americans don’t feel prepared to weather a recession.

That doesn’t mean they aren’t weighing their options for protecting themselves. Data shows consumers are shifting spending habits as a result of economic uncertainty. Our survey told us that, in response to current economic conditions, more than a third of consumers (38%) have dined out less frequently; 36% adjusted their budget; 33% reduced the amount they drive; and 32% began to purchase cheaper or different items than they typically would over the past 6 months to meet their financial needs.

We also saw nearly 1 in 4 Gen-Z consumers (23%) saying they expect to take on another job compared to just 14% of the general population. Drenik: This could potentially be the first time Gen-Z experiences a recession as working adults managing their own finances. How might their concerns differ from other groups who’ve weathered similar downturns like The Great Recession of 2008? Riczko: Data shows that Gen-Z consumers are more concerned about their personal finances compared to the general population.

Nationwide found 60% of Gen-Z rate their personal financial situation as ‘fair’ or ‘poor’ compared to 53% of the general population – with more than 4 in 10 (44%) reporting that their personal financial situation has gotten worse over the past 6 months. For those entering the workforce for the first time, preparing to pay student loans, or securing affordable housing, this period of economic turmoil might be particularly frightening. According to a recent Prosper Insights & Analytics survey, Gen-Z is 7% less likely to pay down debt in the next 3 months compared to other age groups.

That is an alarming statistic considering that student loan debt is at an all-time high. Nationwide Agency Forward research shows that 71% of Gen-Z agree their personal financial situation has been negatively impacted by inflation and rising living costs compared to 66% of the general population. Prosper – Personal Financial Plans Prosper Insights & Analytics Drenik: You mentioned some consumers are considering taking on another job to make ends meet.

In addition to seeking more income, are there concerns about stability with their primary employer? Riczko: Employees are concerned about a spiraling economy and its impact on their employment—primarily about job loss or taking a cut in pay or hours. Our survey shows that when thinking about how a potential recession or economic downturn in the U. S may impact them, 4 in 10 consumers (40%) are concerned about losing their job, being furloughed, or taking a pay cut.

Nationwide data also shows they may not be wrong, as 21% of respondents report witnessing a slowdown in hiring and 33% of Gen-Z experienced a decrease in working hours. In addition to the pause in hiring and decreased hours, 31% of Gen-Z report being asked to take on more responsibilities without additional compensation in the past 6 months. Drenik: When thinking about reducing a household budget, where should consumers think twice before cutting corners? Riczko: Consumers are already making decisions about dining out less or purchasing different foods at the grocery store.

But one area to be cautious when scaling back is with their insurance policies. Nationwide’s Agency Forward research revealed that nearly half of consumers expect their insurance premiums to increase (48%), and that may be why more than half have already looked or will look for ways to save on premiums for their existing policies (56%). Reducing coverage may seem like a short-term fix, but it could prove more costly in the long term.

They may be underestimating the costs associated with problems that could arise in the future and whether they are prepared to take on additional out-of-pocket costs if they reduce their insurance coverage. Due to supply chain issues, increase in costs and inflation, consumers stand to spend significantly more on damages in the event of a catastrophe. So, while cutting coverage may seem like a reasonable idea in the short term, it could actually be more expensive for consumers in the long run.

For example, if you increase your deductible to lower your insurance premium and have a loss, your out-of-pocket cost will be higher. Now isn’t a good time to take on more risk. Consumers should discuss options with their agent.

Drenik: Thank you, Beth, for sharing your insights on the economic challenges consumers are facing and the impact that is having on overall personal finances. It is interesting to understand how the different generations are impacted. We appreciate your time here today as you help us prepare for the economic recession.

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