Consumer sentiment is lower now than in 2009 despite much lower unemployment, creating a "freezing effect" where households and businesses delay major decisions. If this persists, it could trigger the recession people fear. A Wall Street Journal survey of economists shows recession odds have fallen to the low 20s from a 2022 peak.
Here's the key thing I want to look at as I'm thinking about the future in this next couple of years. Here's something I really want to watch closely. That's consumer sentiment. It's down. It is, uh, today's consumer sentiment is lower than it was in 2009, which is hard to believe because unemployment was 10% in 2009. It's 4 points up today. So it doesn't really make sense, but it does reflect the fact that people are nervous. And so I think one thing to really watch for, for this next year especially, is what happens with this metric and how do people feel? Because when we're nervous, human nature, is to do nothing, is to wait, is to hold out. And, uh, and that ultimately, it's a freezing effect. So people are unlikely to move, or less likely if they're nervous. They're more likely to stay with parents, more likely to double up with friends, less likely to go move, to sign a new lease, or even to buy a house. Businesses are less likely to hire. You know, those are things we're kind of seeing a little bit of right now. If that persists, we can worry ourselves into a recession. I hope that doesn't happen. On the other side of this, you know, we could see what happened in 2022, which is for a while was inflation peak, people got really nervous and consumer confidence dropped off. And then we kind of looked around and everyone realized, okay, I'm still doing okay, still got a job, my wages are going up, I got to keep going about my life. I got to go sign that lease. I got to get out of mom and dad's place. It's finally time to go buy that house. It's finally time to start hiring again. We can't keep not, you know, stressing our current staff for so long. We got to start hiring. So I think that's the upside scenario here. And for what it's worth, economists surveyed by the Wall Street Journal, they see decreasing odds for a recession. This is their recession probability index. And you can see that number has come down since peaking in 2022 when inflation peaked. That number's gradually trended down into the low 20s in terms of the probability of a recession. Now, ultimately, a recession is like a thief in the night. You don't know when they're coming, so you take this with a grain of salt as well. But again, kind of worth noting that people who look at this stuff every day see decreasing odds of that happening. Goodbye.
