IN THIS ISSUE:
1. Nearly 70% of Adults See Economy Worsening
2. Half of US Companies Planning To Cut Jobs
3. 98 Million Americans Delaying Healthcare
Overview – Most Americans See Economy Getting Worse
President Biden denies the US economy is in a recession despite the fact that we just endured two consecutive quarters of negative GDP growth, which many consider the classic definition of a recession. Now a new poll finds that almost 70% of Americans believe the economy is getting worse. What more does the Biden administration need?
Making matters worse, a new survey of business leaders around the country found that over 50% are planning to cut their workforce in the weeks and months ahead. Others are planning hiring freezes for at least the rest of this year. So, while we saw a hiring frenzy earlier this year, most CEOs are pulling in their horns.
And finally, nearly 100 million Americans are delaying getting the healthcare they need, largely due to soaring inflation. According to a new Gallup poll, 98 million Americans have put off needed healthcare as they struggle to afford food, gas, energy and other household items. That is over one-third of all adults, so this is truly sad.
One bright spot is the Atlanta Federal Reserve Bank’s GDPNow indicator, which tracks GDP on a weekly basis. It shows the economy is still in slightly positive territory at +1.6% (annual rate) for the 3Q so far. Let’s hope it stays that way!
FYI, the National Bureau of Economic Research (NBER), the official arbiter of when recessions begin and end, still has not declared the economy is in a recession this year – although I will not be surprised if it does so any day now. I’ll keep you posted.
ABC News Poll: Almost 70% of Adults See Economy Worsening
While the Biden administration deflects on the long-held simple definition of recession, an ABC News/Ipsos poll found almost 70% of adults believe the US economy is getting worse.
Just 12% responded they believe President Joe Biden's economy is getting better after it posted back-to-back quarters of negative growth – the traditional definition of an economic recession. The remaining 18% believe the economy has remained the same.
The numbers come just months before the 2022 midterm elections when Republicans are looking to take back the majorities in the House and Senate. About 75% of Republican voters say they are enthusiastic about voting in these midterms, which is higher than Democrats (68%) or Independents (49%).
ABC News noted, however, that the numbers have risen slightly for Democrats since June, as abortion has become an important voting issue. There are 49% of adults favoring a candidate who supports keeping abortion legal, while just 27% say they will support a candidate seeking to restrict abortions. This poll helps President Biden and the Democrats. The question is, by how much?
President Biden is also benefitting some on gas prices, which have been declining off their record highs in the second quarter. Biden's approval rating on gas prices is up 7 points since June, reaching 34% approval now – but still very low.
Still, Biden's overall approval rating in the polls remains under water at 42%, according to the latest RealClearPolitics average, with over 55% disapproving. That is largely because inflation remains a drag on Biden's approval. Just 29% approve of the job Biden has done on inflation, while 69% disapprove, according to the ABC News poll.
The ABC News/Ipsos poll was conducted August 5-6 among 665 Americans. It has a margin of error of plus or minus 4.2 percentage points. Some other recent polls asking similar questions about the economy and the direction of the country show even more than 70% of Americans are worried about where we’re headed.
Half of US Companies Planning To Cut Jobs
What’s worse is a new survey showing companies across the country are planning to scale back their headcounts after a year of frenzied hiring.
That's according to a new survey published last week by consultant PwC, which recently polled more than 700 US executives and board members from various industries. About half of respondents said they are preparing to reduce headcount — or already have — while 52% have implemented hiring freezes.
On top of that, roughly 46% of companies are either dropping or reducing signing bonuses, which became commonplace over the past year as businesses tried to lure in new workers amid an increasingly tight labor market. Another 44% are rescinding offers entirely, the survey showed.
Respondents are also taking proactive steps to streamline the workforce and establish the appropriate mix of worker skills for the future, the survey said. "This comes as no surprise. After a frenzy of hiring and a tight labor market over the past few years, executives see the distinction between having people and having people with the right skills."
Still, the report showed some incongruities within the labor market: Although many businesses are scaling back their workforce, roughly two-thirds said they have increased wages or expanded mental health benefits. Nearly 70% of businesses reported allowing more employees to work from home permanently. How the workforce has changed since Covid!
The survey comes amid growing concerns the Federal Reserve's war on inflation could trigger a recession. Fed policymakers approved another mega-sized, 75 basis point rate hike — triple the usual size — at their meeting in July and have since signaled they are "nowhere near" ending this tightening cycle, despite signs of a slowdown in the economy.
While some parts of the economy appear to be softening — namely the housing sector — the labor market has proven to be a bright spot for months. Job growth last month blew past expectations, with employers adding a stunning 528,000 new positions, pushing the unemployment rate to a historic low of 3.5%.
However, there are signs the labor market is starting to weaken. A plethora of companies, including Alphabet's Google, Walmart, Apple, Meta and Microsoft have announced hiring freezes or layoffs in recent weeks.
Fed Chairman Jerome Powell last month described the labor market as "very hot" — and that was before the blowout July jobs report — but suggested there will likely be some "softening in labor market conditions" as a result of higher interest rates. But he has remained optimistic that the unemployment rate won't increase too much as the central bank aims to achieve the elusive soft landing.
"I also said that our goal is to bring inflation down and have a so-called soft landing, by which I mean a landing that doesn’t require a significant increase, a really significant increase in unemployment," Powell said. "We’re trying to achieve that."
98 Million Americans Delaying Healthcare Due To Inflation
With everything getting more expensive, Americans are cutting corners in their spending but are potentially shortening their lives, according to a Gallup poll conducted for West Health, a healthcare advocacy group.
An estimated 98 million Americans have put off healthcare as they struggle to afford food, gas, energy, and household items, West Health found. The figure comes from the 38% of American adults who have either borrowed money to pay for healthcare or had to delay or skip treatment.
Those forced to sacrifice healthcare to afford basic things – driving, utilities, and food – were disproportionately among lower-income households. More than half of those making less than $48,000 a year had to cut healthcare spending, while even 20% of those making more than $180,000 were forced to cut back, too, according to the poll.
"People have been making tradeoffs to pay for healthcare for years," West Health President Timothy Lash wrote in a statement. "Inflation has only made things worse as people are also now struggling with the high price of gas, food, and electricity."
As the inflation rate was 9.1% in June at the time of the poll, healthcare inflation was at half that at 4.5%, and most Americans were unaware of the rising cost. Just 3% of adults believed inflation was going to raise the cost of their healthcare in the next six months, according to the poll. It was gas (43%) and food (34%) that were far more apparent to consumers.
Still, 39% said they are "extremely concerned" or at least "concerned" about being unable to pay for healthcare in the next six months, including 33% of Democrats, 44% of Republicans, and 42% of independents.
"Inflation is hollowing out consumer spending habits across an array of areas," Gallup pollster Dan Witters wrote in a statement. "What is found just under the surface is that after gas and groceries, the role of inflation in reducing the pursuit of needed [health]care is large and significant. And the rising cost of care itself, which is originating from an already elevated level, is having an outsized impact on lessening other forms of spending, compounding the problem."
The Gallup poll was conducted for West Health between June 2-16 among 3,001 adults living in all 50 US states and the District of Columbia. The margin of sampling error varied from 2.2 percentage points to plus or minus 4 percentage points for subgroups.
The fact that nearly one-third of American adults are delaying their healthcare needs is the saddest of all the news I have reported in this letter. I’ll leave it there for today.
Your very concerned editor,
Gary D. Halbert
© Halbert Wealth Management
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