Image Source: Shutterstock
By Jim DuPlessis
Source: www.cutimes.com, July 2019

Fewer middle class families are optimistic about their prospects as their fears of a recession grow, according to a survey released Tuesday by CUNA Mutual Group.

When CUNA Mutual Group asked 1,288 adults in May to grade themselves on their prospects for achieving the “American Dream,” 41% gave themselves a “C.” That was down from a “B-minus” in a similar survey it conducted last fall.

One reason for the heightened anxiety is fear of recession, which nearly half of respondents expect to arrive in the next year. The survey included people 18 or older making $35,000 to $100,000 a year.

“The middle class is mired in uncertainty,” said Steve Rick, chief economist at CUNA Mutual Group in Madison, Wis. “We’re seeing stagnating job growth, limited wage growth and increasing market volatility attributable to headwinds from tariffs and unfinished trade negotiations.”

Rick said families should be taking steps to prepare for a downturn, such as cutting spending, building savings to avoid having to cut into their retirement to stay afloat, or even refinancing a mortgage if that will put them in a better position to weather a storm.

“This should be a wake-up call to families to start shoring up their finances now,” Rick said. “If there’s one thing 2008 taught us, it’s that you can’t afford to be caught on your heels if a recession hits.”

However, respondents were more confident in their own financial stability than the economy as whole.

Among them, 88% said they feel their job is “somewhat” or “very secure” over the next year.

It also found 61% considered themselves “somewhat” to “very confident” in their personal economic position, but that broke down to roughly 20% of respondents being “very confident” and 40% being only “somewhat confident,” meaning they can comfortably pay their bills, but want to save more in the long run.

Women and people with children tended to be more pessimistic than their child-free counterparts. Parents were almost twice as likely as those without children to reduce their retirement savings contributions in the face of a recession.

The survey also found:

  • 53% would cut discretionary spending, and 52% would make lifestyle changes in the event of a recession.
  • 54% of women were “somewhat” or “very confident” about their economic position, versus 68% of men
  • 82% of women feel “very confident” about their economic position, compared with 89% of men
  • 43% of women said their job feels “very stable,” versus 51% of men
  • 51% of women said they were wary of a recession, compared with 48% of men.

Women aren’t the only respondents with a heightened sense of uncertainty, with the survey finding more anxiety among parents than their child-free counterparts. People with children are more concerned the U.S. will enter a recession in the coming year compared to those without children (54 percent versus 47 percent).

54% of people with children were concerned about a recession arriving in the next year, compared with 47% for those without children.

The survey was conducted in May as yields inverted on short and long-term Treasury bonds.

Usually long-term bond yields are higher than those for short-term notes. The opposite is considered an inverted yield, a condition that has preceded every recession since 1955.

The yields between the 3-month and the 10-year Treasury bonds have have been inverted since May 23.

When a 3-month versus 10-year inversion lasted 10 days or more in the last 50 years, a recession followed on average 311 days later, according to an analysis by Bianco Research.