81% of U.S. adults are worried about a recession hitting this year, a survey finds

After two years of the coronavirus pandemic, a recession and a rapid recovery, Americans are worried that the economy may swiftly decline once again.

Some 81% of adults said they think the U.S. economy is likely to experience a recession in 2022, according to the CNBC + Acorns Invest in You survey, conducted by Momentive. The online survey of nearly 4,000 adults was conducted from March 23 to 24.  

Economists are warning of a possible recession.

Rapid inflation, soaring oil prices and global instability have led forecasters to sharply lower their estimates of economic growth this year, and to raise their probabilities of an outright contraction. Investors share that concern: The bond market last week flashed a warning signal that has often — though not always — foreshadowed a downturn.

Such predictions may seem confusing when the economy, by many measures, is booming. The United States has regained more than 90 percent of the jobs lost in the early weeks of the pandemic, and employers are continuing to hire at a breakneck pace, adding 431,000 jobs in March alone. The unemployment rate has fallen to 3.6 percent, barely above the pre-pandemic level, which was itself a half-century low.

Why Are Analysts Worried about Another Recession?

Perhaps the biggest concern of experts who see a potential recession coming are the big changes in the Federal Reserve’s strategy. After playing down inflation for much of 2021, the Fed has finally found religion when it comes to getting price growth under control.

The Fed started preparing markets for tighter monetary policy in January, when Fed Chair Jerome Powell said the central bank would lower its $9 trillion balance sheet sometime in 2022 and begin the process of withdrawing cheap money from the economy. This put pressure on stocks across the board—especially high-flying tech companies that thrive in such an environment.

Economists for the 153-year-old bank put the probability of a U.S. recession within the next 24 months at 38% in April, striking a far less bearish tone than many Wall Street peers. But on Monday, Goldman analysts led by Jan Hatzius admitted that risks to the U.S economy have grown over the past month.

The investment bank still isn’t calling a recession just yet. A strong U.S. consumer may help the Fed secure a “soft landing”—where inflation is kept at bay without instigating an economic downturn—in 2022 as interest rates rise, Goldman says.

“Recession risk has risen,” Goldman analysts wrote in a Monday note. “The financial health of the private sector may ultimately determine whether policy tightening will tilt the economy into a downturn.”

Deutsche Bank Sees 5%-6% Fed Target Rate and Deep U.S. Recession

The Federal Reserve is likely to need to engage in the most aggressive monetary tightening since the 1980s to tamp down an inflation rate at a four-decade high, which will lead to a deep U.S. recession next year, Deutsche Bank AG economists warned.

“We assume conservatively that a Fed funds rate moving well into the 5% to 6% range will be sufficient to do the job this time,” the authors including David Folkerts-Landau, group chief economist and head of research, wrote in a report Tuesday. “This is partly because the monetary-tightening process will be bolstered by Fed balance-sheet reduction, which our U.S. economics team estimates will be equivalent to a couple additional 25 basis-point rate hikes.” 

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