When 40% of Americans say their top New Year’s resolution is paying off credit card debt, and 39% say their priority in 2008 will be putting more money into their savings accounts, it is clear that fears of an impending recession are growing.
That’s only natural, given how well both the U.S. and the global economy have been doing over the past few years, says Dan Houston, executive VP of retirement and investor services at Des Moines, Iowa-based Principal Financial Group, which every quarter polls 1,154 employees at growing businesses and 514 retirees to put together the Principal Financial Well Being Index (WBI).
Now, though, things look set to change, Houston says, and according to Principal Financial’s latest WBI, nearly three-quarters, or 71%, of American workers and 72% of retirees either believe the economy has fallen into a recession or fear that it is headed in that direction. Workers are also showing increased concern about their job security–more than one-third (37%) of those polled by Principal Financial expressed concern about their own job security, a figure that’s up significantly from only the second quarter of this year when just 22% of workers expressed concern, Houston says. “The last time I saw these kinds of fears was in 2000, when people were looking at the tech bubble and waiting for it to burst,” he says.
The years following the tech stock debacle were marked by a slowdown in the U.S. economy, which then picked up steam in 2004, and since then, “the consumer has kept us in the hunt, representing two-thirds of the American economy,” Houston says.
He believes that the next WBI, which Principal Financial will put together in the first part of March 2008, will be even more negative than 2007′s fourth-quarter findings. But even if Houston–who has been with Principal Financial for 23 years–has seen a number of economic ups and downs, this time he has a little more credence in people actually practicing what they preach. That’s not because the American consumer has changed, but because legislation that forms part of the Pension Protection Act (PPA)–in particular the automatic enrollment feature that goes into effect in January 2008–is by its nature going to “make people do the right thing,” he says. “We work with advisors to help employees save more,” Houston says. “We’re hoping that our first WBI after the automatic enrollment period in January will reflect some good news from advisors, even if people remain generally negative on the economy.”