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Opinion
Jared Dillian

Americans Are Talking Themselves Into a Recession

If not even one of the hottest job markets in history can cheer up consumers, then an economic downturn looks inevitable.

There's a reason why you can probably snag a good restaurant reservation now.

There's a reason why you can probably snag a good restaurant reservation now.

Photographer: Kena Betancur/AFP via Getty Images

Long-held economic theory says that just the expectation that inflation will accelerate will cause actual inflation to accelerate. The thinking here is that if consumers expect prices for goods and services to rapidly increase in the near future, they will buy earlier, faster and in bulk, which causes those prices to rise faster than they would otherwise. Makes sense, but can the same be said about a recession? Sure, and it may be happening now and in real time.

If people fear that the economy is about to take a turn for the worse, they will reduce spending, trade down to cheaper brands, postpone consumption and economize in general. The net effect if enough people take such action would be a recession. And guess what? The part of the University of Michigan’s latest monthly index of consumer sentiment that shows whether people say it’s a good time to buy a major household item has fallen to a record low in data going back to 1980. The same goes for the buying a vehicle. Buying a house is only slightly better, only dropping to its lowest since 1982.