For these Americans, the recession has already begun

() — Wall Street bankers, investors and economists have been debating for months whether a recession is looming in the United States. But for some Americans, the unrelenting economic pain typical of the recession has already knocked on their door.

Al Brown and his fiancée faced a difficult decision in May when reviewing their weekly budget: What do we need more of, food or dish soap?

Brown, who lives in Concord, North Carolina, was the main support for his fiancée and their two children. In April, he was laid off from his job as global director of business development at software company Cascade.

She has since given up her gym membership and has sold various items from her home, including a computer and patio furniture, to make ends meet. Her 13-year-old son left the basketball team. Losing the family’s source of income has taken a toll on him financially, but also mentally.

“This is America”

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

The 37-year-old man now spends his time looking for work on the Internet or writing to potential contacts. After submitting more than 600 applications, only a few have resulted in interviews, he says.

This is far from the strength of the labor market shown by the government figures. Despite the sharp rise in interest rates by the Federal Reserve, in recent months there has been a strong increase in employment and in May the unemployment rate was 3.7%.

Investors and economists have been expecting a recession since last year, when the Federal Reserve raised interest rates to control inflation. This made companies focus more on profitability than growth, which resulted in spending cuts and workforce reductions.

Since then there have been tens of thousands of layoffs. Some of those laid-off workers have been able to get ahead. Others have not been so lucky.

Nina McCollum, 54, stopped working as a staff writer at Glassdoor in March. She hasn’t found a new position since then, despite having applied for hundreds of jobs.

She has been living off her savings, selling her blood plasma and frequenting food pantries to get by, while taking care of her teenage son. Her partner does help her, but she cannot make up for her loss of income.

“I think it’s unlikely that I’ll ever have a good-paying job with benefits like the one I had,” says McCollum, who lives in Cleveland, Ohio.

Reduction of costs in companies

Some experts predict that more Americans are likely to find themselves in this situation.

As we move through 2023, “and into next year, there’s going to continue to be this focus on trying to cut costs, and it’s going to lead to more unemployment,” said Thomas Simons, chief economist at Jefferies.

The impact of the layoffs, which are currently concentrated in white-collar workers, will reverberate throughout the economy through a “big pullback in global spending,” Simons said. Consumer spending accounts for about two-thirds of economic output, so if more Americans are forced to cut spending because of being laid off, the US economy could go into recession.

A shopper carries bags in Miami, Florida, on Wednesday, June 14, 2023. Credit: Eva Marie Uzcategui/Bloomberg/Getty Images

The National Bureau of Economic Research does not typically rule on it until several months after a recession has started. The academic group defines a recession as a broad slowdown in economic activity that lasts for more than a few months.

Some hopeful signs

However, the data points to resilient financial markets and a well-functioning national economy. Stocks are up this year: The Nasdaq Composite Index posted its best first half since 1983, even after the Federal Reserve signaled it might keep raising interest rates after its June pause.

Traders work at the New York Stock Exchange on May 25, 2023. Credit: Timothy A. Clary/AFP/Getty Images

And the economy has had some shock absorbers: the savings Americans amassed during the pandemic and falling behind on student loan payments. But student loan payments resume later this year, and savings accounts are running low.

Some experts have pushed recession bets away as the economy has been more resilient than expected. Bank of America CEO Brian Moynihan told 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, he said: The data shows remarkable economic resilience, but in his world it looks like a recession is already underway.

A career turn

Regina Walton was laid off from her job as director of community management and client 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 real estate markets in the country.

Walton says she’s been through “a lot of uncertainty” but tries to remain optimistic and resilient. He sees his firing as a sign that he should finally turn his career toward product management, something he wanted to return to from a previous job.

Even so, he always has in mind the reality of having to pay rent and other daily expenses.

“It’s always hard to lose a job, but I’ve had to rely on myself 100%,” says Walton. “I have nothing, I’m not married, I’m single, and my parents have died. I’m an only child. I’m my main support system.”

From left to right: Richard Murray, Nina McCollum, Regina Walton. All three were laid off earlier this year and have struggled to find new roles as more companies cut jobs as a cost-saving measure in an uncertain economic environment. Courtesy of Richard Murray/Nina McCollum/Regina Walton

For many Americans, this is not the first time they have been laid off. Companies cut their workforces after the start of the covid pandemic in 2020, when companies closed and Americans stayed home.

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

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

Health insurance costs

But that plan expired on July 1, after which you’ll have to start paying entirely out of pocket.

Murray says he could decide to go without coverage to avoid the extra costs.

Murray, who lives in Boston with her border collie, Maverick, has already made some lifestyle adjustments to cut costs. He now shops at a local chain instead of Whole Foods, like he used to, and has given up personal training sessions at the gym.

But nearly 50 million people also left their jobs in the two years after the pandemic began. That means laid-off Americans were often able to find a new job quickly due to a hot job market. Now there is no such mattress.

Brown says he was first fired last August by another company before joining Cascade and being fired again.

“I’d like companies to understand what that really means, what it’s doing to people when they just think they need to cut costs,” Brown says.