Navigating Economic Uncertainty: Are Americans Financially Prepared for a Recession?
The U.S. economy has taken Americans on quite the rollercoaster ride over the past several years. A shaky recovery from Covid has included skyrocketing interest rates, continual supply chain snarls (remember when we ran out of baby formula?), and a dramatic inflation spike. On the world stage, the war in Ukraine and simmering tensions with China are enough to put anyone on edge. It’s no wonder that a number of economists are still predicting a 50% chance of a recession looming in our future.
Here at HB Capital, we wanted to know how everyday Americans feel about the possibility of a recession. Were they financially prepared for a faltering economy? What would they do if a recession struck? We interviewed 518 people on this topic in an Economic Uncertainty Study. Our survey participants were Americans between the ages of 25 and 54, all employed in some fashion. Here’s what we found.
Key Takeaways from the Economic Uncertainty Study
82% of respondents are concerned about a potential recession in the near future.
Nearly 60% of respondents have experienced a negative impact on their personal financial situation.
47% of respondents are currently financially preparing for a recession.
75% of respondents have experienced financial difficulties in the past year.
2 out of 5 respondents said $500 or more expense would have a significant negative impact on their overall financial situation.
52% of respondents said they would likely explore borrowing options to navigate through a recession.
Credit cards and personal loans would be the most common choices for resources to help during financial difficulties.
21% of respondents said they were not prepared to handle any additional expenses.
Our study found that while a good majority of Americans worry about an upcoming recession, not everyone is ready for the potential hardships a flagging economy could present. Let’s dig deeper into the data and see what your neighbors, friends, and family members are doing to prepare for an economic downturn.
A Majority of Americans Are Worried About a Recession
Are Americans concerned about a possible recession? The answer is a resounding yes. One of the biggest takeaways from the Economic Uncertainty Study is just how many of our survey participants are worried about a recession in the near future. Over 80% of respondents acknowledged that they were either very concerned or somewhat concerned about a recession just around the corner.
Contrast that number with just 6% of respondents who were not very concerned or not concerned at all about a possible recession. This single question tells us that a large majority of our fellow Americans don’t feel confident about the future of our economy, at least in the near term.
How Are Americans Doing Financially?
Why are so many Americans worried about the possibility of a recession? Understandably, the answer could have to do with all the twists and turns the economy has taken over the past few years. However, the results of our study suggest one potential reason could have to do with personal financial setbacks.
Over 30% of our respondents reported experiencing significant financial difficulties in the past year, while another 46% told us they faced some financial difficulties. It makes sense that Americans who are not on firm financial footing would be the most concerned about a recession heading our way.
How Are Americans Preparing for a Recession?
A strong majority of our survey participants expect a recession to happen soon. So what are they doing to prepare for this unhappy possibility? Our survey found that nearly 50% of respondents are already saving more and reducing their expenses. Additionally, almost 30% of respondents are considering making financial adjustments in their lives.
Less than 20% of the people who took our survey reported they hadn’t changed their financial habits yet.
What Are Americans Most Concerned About?
If a recession should hit, what are our survey participants most worried about? The results of our survey are hardly surprising. The biggest area of concern was housing and living expenses (33.2% of respondents), followed by employment and income stability (24.5%).
Are Americans Ready for a Recession?
What would happen to our neighbors and community members if the economy were to dip into a recession? Our survey found that many of our participants are not able to absorb a significant financial setback.
One of the most revealing findings of our study is that over 65% of respondents reported an unexpected $2,000 expense would have a significant negative impact on their financial stability. Over 43% of respondents noted that a surprise $500 or more expense would represent a big financial burden.
Only 20% of our survey respondents felt very prepared to handle additional expenses, while 45% of respondents admitted they were only somewhat prepared or not prepared at all to absorb a big financial hit.
How Will Americans Deal with a Recession?
If the economy were to dip into a recession, how would people react? Over 70% of our survey respondents told us they would be very likely or somewhat likely to cut back on non-essential expenses. Additionally, about 60% of respondents would be very likely or somewhat likely to think twice about making major purchases, such as buying a new car or home.
While nearly three-quarters of Americans are ready to tighten their belts should a recession hit, it’s worth noting that a small minority of our survey respondents don’t seem overly worried about a recession. About 16% of respondents noted they were somewhat unlikely or very unlikely to cut back on non-essential expenses in the event of a recession.
Where Would Americans Turn for Help in a Recession?
Our Economic Uncertainty Study has shown that many would struggle with an unexpected loss of income. For some, simply cutting back on expenses might not be enough to maintain their financial stability. As a leading loan provider, we were naturally curious if Americans would be interested in seeking financial assistance or borrowing options if a recession should hit.
Turns out, the answer was yes. Just over half of our respondents told us they would be very likely or somewhat likely to explore borrowing options to help them navigate a recession.
What specific borrowing options would they choose if a recession were to hit? According to our data, the most popular financial fallback would be credit cards or a line of credit. Next up would be personal loans, followed by government assistance. Respondents were much less likely to want to turn to friends or family for financial help or to pull money from their retirement accounts.
What the Data from the Economic Uncertainty Study Shows
While we can’t predict what the American economy will do in the future, our Economic Uncertainty Study shows a large majority of our survey participants are expecting a potential recession in the near future.
Perhaps one of the biggest revelations from the Economic Uncertainty Study is how unprepared Americans are for a recession and a potential loss of income. Nearly half of survey respondents admitted they were only somewhat prepared or not prepared at all for a recession, and many noted they would also struggle to cope with an unexpected expense as low as a few hundred dollars.
Fortunately, many Americans are already preparing for a recession by lowering their spending and boosting their savings. The data shows that saving is just not enough in most cases. Credit cards would often be a first line of defense in the event of financial difficulties, over half of our respondents would consider seeking a loan to keep them afloat during a recession. In fact, 64% of study participants agreed that having access to personal loans would be a great benefit when managing unexpected expenses.
About HB Capitall
HB Capitall is a leading provider of consumer financial services. Our services include competitive rates for loans, term loans, cash advances, lines of credit, working capital, repair credit and more. Explore our instant loan options online or in-store to get the money you need for your business.
We’ve worked to meet our customers where they are and provide them with the financial infusion they need for life’s expenses. The participants of the Economic Uncertainty Study told us that they want fast and flexible loan solutions online and in person. That’s exactly what we offer at HB Capitall.