A 2023 Recession Is Coming, Say 81% of Middle-Income Americans. Are They Right?

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It’s easy to see why so many think that way. 

Many financial experts spent much of 2022 sounding dire warnings about an upcoming recession. And so at this point, it’s not really shocking to see that many Americans are worried about a near-term economic downturn.

In fact, in a recent survey by Primerica, 81% of middle-income Americans said they think a recession will strike at some point in 2023. But is that prediction accurate?

We might manage to avoid a recession

A recession could hit if consumer spending declines to a drastic degree in 2023. But so far, there are no signs of that happening.

During the 2022 holiday season, in fact, consumer spending rose a lot. And while some Federal Reserve data points to a recent decline in consumer spending, we’re not talking about a drastic one.

As such, there’s no reason to assume that a 2023 recession is a given. Not only has consumer spending held fairly steady despite aggressive interest rate hikes on the part of the Federal Reserve last year, but unemployment levels today are basically at a 20-year low. And that’s a sign of a healthy economy — not an economy on the verge of collapse.

It’s best to prepare for a recession regardless

A recession may not hit in 2023. But preparing for one is never a bad thing, because in a worst-case scenario, you’ll have shored up your finances for no specific reason. And perhaps the most important step you can take to gear up for a recession is to boost your emergency fund if it could use a lift.

Take a look at your savings account balance. Do you have enough money in there to cover at least three full months of essential bills, like your rent, car payments, food, and utilities? If not, consider it a wakeup call to do what you can to boost your savings, whether by cutting back on spending or getting a second job.

Along these lines, if you have job skills that could use some refreshing, make that effort. If a recession does hit, unemployment levels could rise as companies are forced to cut their headcount. A good way to avoid winding up on the chopping block is to stay current with your skills and continuously work to improve them. After all, your employer is apt to have a harder time parting with strong performers than employees who come in, do the bare minimum, and don’t add a ton of value.

Finally, now would be a good time to shed lingering credit card debt — such as balances you racked up during the holidays, or during periods of higher inflation levels last year. Not having those debt payments to cover could make it easier to get through a period of unemployment should that come to pass.

A recession is by no means guaranteed to happen in 2023, even if many consumers think otherwise. But it’s still a very wise idea to prepare for economic conditions to worsen so you’re well-positioned to ride out a downturn and avoid long-term financial pain.

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