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For these Americans, the recession is already here

<i>David Paul Morris/Bloomberg/Getty Images</i><br/>A pedestrian carries a shopping bag in San Francisco
David Paul Morris/Bloomberg/Getty Images
A pedestrian carries a shopping bag in San Francisco

By Krystal Hur and Bryan Mena, CNN

(CNN) — Wall Street bankers, investors and economists have for months waffled over whether a US recession is coming. But for some Americans, the unforgiving economic pain typical during recession has already set in.

Al Brown and his fiancée faced a tough call in May when reviewing their weekly budget: What’s a higher priority, more food or dish soap?

Based in Concord, North Carolina, Brown was the main breadwinner for his fiancée and their two children. Then in April, he was let go from his job as a global director of business development at software company Cascade.

He’s since quit his gym membership and sold miscellaneous items around his home, including a computer and yard furniture, to make ends meet. His 13-year-old son quit the basketball team. While losing the family’s source of income has taken a financial toll, it’s also resulted in a mental one.

‘This is America’

“This is America, where your worth is your finances. There’s no other way to look at it,” Brown said.

Brown, 37, now spends his days scouring the internet for jobs or reaching out to potential connections. After filing over 600 applications, only a handful have produced interviews, he says.

That’s a far cry from the labor-market strength depicted in government figures. Despite the Federal Reserve’s punishing rate hikes there have been robust job gains in recent months and a low 3.7% unemployment rate in May.

Investors and economists have been expecting a recession since last year as the Fed raised interest rates to tame inflation. That triggered companies to focus on profitability over growth, which meant cutting spending and reducing their workforces.

Tens of thousands of layoffs have resulted since. Some of those laid-off workers have been able to land on their feet. Others haven’t been as lucky.

Nina McCollum, 54, was laid off from her writing gig at jobs site Glassdoor back in March. She hasn’t found a new role since, despite applying to hundreds of jobs.

She’s been living off her savings, selling her blood plasma and frequenting food pantries just to get by — all while taking care of a teenage son. Her domestic partner helps out, but he can’t make up for her lost income.

“I think it’s unlikely that I will get another good paying job with great benefits like the one I had,” McCollum, who lives in Cleveland, Ohio, said.

Corporate cost-cutting

More Americans are likely to enter this predicament, some experts predict.

As we go through 2023, “and into next year, there is still going to be this focus on trying to reduce costs, and it is going to result in more unemployment,” said Thomas Simons, a senior economist at Jefferies.

The impact of layoffs, currently concentrated among white-collar workers, will reverberate throughout the economy through a “big pullback in overall spending,” Simons said. Consumer spending accounts for about two-thirds of economic output, so if more Americans are forced to cut back because they were laid off, that might throw the US economy into a recession.

The National Bureau of Economic Research typically doesn’t actually make that call until several months after one has begun. The academic group defines a recession as a broad slowdown in economic activity lasting more than a few months.

Some hopeful signs

Still, data points to resilient financial markets and a domestic economy that’s humming along just fine. Stocks are up for the year — the Nasdaq Composite index had its best first six months of the year since 1983 — even after the Fed has signaled that it could continue raising rates after its hawkish pause in June.

And the economy has had some buffers: the savings Americans accumulated during the pandemic and the delay of student loan payments. But student loan repayments restart later this year, and savings accounts are drying up.

Some experts have pushed recession bets further out as the economy has proved more resilient than expected. Bank of America Chief Executive Brian Moynihan told CNN last week that he expects a mild recession early next year, rather than the late 2022 recession many have predicted.

That’s what frustrates McCollum the most, she said: Data shows remarkable economic resilience, but in her world, it feels like there’s already a recession happening.

Pivoting careers

Regina Walton was laid off from her job as a director of community management and customer advocacy in early May and has been looking for a part-time job. She has type 1 diabetes and lives in the San Francisco Bay Area, one of the most expensive housing markets in the country.

Walton said she’s been living through “a lot of uncertainty,” but she’s trying to stay optimistic and resilient. She sees her layoff as a sign that she should finally pivot her career to product management — something she’s been wanting to return to since a previous job.

Still, the reality of having to pay rent and a slew of other everyday expenses is always in the back of her mind.

“It’s always difficult to lose work, but I’ve just had to rely on myself 100%,” Walton said. “I don’t have anything, I’m not married, I’m single and my parents are dead. I’m an only child. I am my main support system.”

For many Americans, this isn’t their first time getting laid off. Companies slashed their headcounts after the onset of the Covid pandemic in 2020, as businesses shuttered and Americans stayed home.

Richard Murray, 33, was laid off in 2021, when the company where he worked in digital sales eliminated his role.

He was laid off again from another job about four months ago, and was initially able to keep his health insurance through the Consolidated Omnibus Budget Reconciliation Act (COBRA), which generally requires employers with more than 20 workers to offer a temporary extension of health coverage to former employees.

Health insurance costs

But that plan expired July 1, after which he’ll have to start paying completely out of pocket. Murray says that he might decide to go without coverage to avoid the extra costs.

Murray, who lives in Boston with his border collie, Maverick, has already made some adjustments to his lifestyle to reduce spending. He now shops for groceries at a local chain rather than Whole Foods, like he used to, and he’s quit personal training sessions at the gym.

But nearly 50 million people also quit their jobs during the two years following the pandemic’s onset. That means that laid-off Americans were often able to find a new job quickly due to a hot job market. No such cushion exists now.

Brown says he was first laid off last August by a different firm before he joined Cascade and was let go once again.

“I wish companies understood, what does that really mean — what you’re really doing to people when you’re just looking at it as hey, we need to cut some costs,” Brown said.

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