Survey Shows 91% of CEOs Expect a Recession in the Next Year. Should You Be Worried?

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KEY POINTS

  • A recent survey revealed 91% of CEOs believe a recession is imminent.
  • Many think the recession will be a lengthy one.
  • This could affect your finances for a few key reasons.


Things aren't looking very good for the economy right now.

America's business leaders are not optimistic about the direction of the economy. In fact, according to a survey conducted by KPMG, a consulting firm, approximately 91% of the leaders of 400 large U.S. companies believe that a recession will occur within the next year.

A recession has long been defined by many people as two consecutive quarters of negative economic growth, but other factors including the unemployment rate can also impact whether the country is in a recession. And some people, including many CEOs, believe we're on the brink of a major economic downturn that could affect people's finances in profound and adverse ways.

"There has been tremendous uncertainty over the past two and a half years," the chairman and CEO of KPMG US, Paul Knopp, said, speaking of both the global pandemic and inflationary concerns as prices surge. "Now, we have another looming recession."

CEOs are pessimistic about more than just the possibility of a recession

KPMG's survey contained a lot of bad news. Not only did the vast majority of business leaders indicate they believe a recession is coming soon, but many also believe the economic downturn will last for a long time. Just 34% of survey respondents said they believe the recession will be a short one, so 66% -- the vast majority -- think we're in for a long, rough road.

Most CEOs taking the survey also said they believe the upcoming recession will be more than just a modest pullback. And many are watching for news about the upcoming midterm elections, which could potentially impact the stability of the economy and the likelihood of a prolonged economic slowdown.

"There is real uncertainty about the outcome of the midterms and potential for tougher tax legislation and increased regulations," Knopp warned.

Should you be worried?

Obviously, there's strong reason to worry with the majority of company CEOs warning that a long recession is about to hit the U.S. And many of these company leaders also indicated their businesses are taking steps now to prepare for the coming downturn.

In most cases, companies getting ready for a recession will lay off employees to cut their costs and respond to what is most likely to be a reduction in demand for goods and services. Unfortunately, as more people become unemployed and cut back on spending, the overall economy worsens.

In this way, fears of a recession could be a self-fulfilling prophecy as business leaders lay off workers in preparation for a slow down -- and then those workers stop spending and cause reduced demand. "Companies can't overreact in the short term because that can create problems for the long-term," Knopp warned.

If you work for a company that could potentially lay you off due to coming economic troubles, you may be very worried right now, and with good reason. Likewise, if you're in a tough financial spot with high credit card bills or a mortgage you're struggling to pay, then you aren't in a great position to cope with a recession either.

But if you have a hefty emergency fund, hopefully this extra money can see you through until things turn around. You may still have reason to worry about your job security (depending where you work) but at least you'll know that your emergency savings can cover the essentials for a while if it has to.

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