Poll on the economy: Americans gloomier, for now

As people on Wall Street and Main Street hold their breath to see if a federal bailout of the nation's financial institutions will work, Americans are starting to speak — not whisper — the word "depression."

In a sign that anxiety is growing, 33% of 1,011 adults surveyed over the weekend by USA TODAY and Gallup said the economy already is in a depression (though by economists' measures it is not). Just 12% said that 10 months ago.

"From the working people's point of view, we're losing jobs and have rising unemployment," says Charles Dooley, 64, of Audubon, N.J., who delivers newspapers for The Philadelphia Inquirer. "Yes, I think we're in a depression."

Seventy-three percent said U.S. financial troubles will get worse before they get better. They expect their taxes to go up, and many worry about affording retirement or maintaining their standard of living. Nearly half worry about their homes losing value; 20% are seriously looking at taking money out of the stock market.

Trust is shifting from stocks and real estate to federally insured bank CDs. And nearly 30% have postponed, or are thinking about postponing, a big purchase. Almost half of those with jobs are more worried than before that the Wall Street crisis will mean their pay or benefits will be cut.

But beyond the current woes, 58% of Americans see better economic times ahead — in just a year. Only 3% think the economy is growing now, but 42% expect it to be growing a year from now. While 69% say we're in a recession or depression, only 36% think it will be that bad in a year.

And in fact, the economic woes are nothing close to the Great Depression, even if it feels that way to some. We're nowhere near the days of wandering homelessness evoked in John Steinbeck's 1939 Pulitzer Prize-winning novel, The Grapes of Wrath.

Starting in 1929, the U.S. economy shrank for four consecutive years. In 1940, the economy still was smaller than in 1929 before the stock crash.

The economy today, though wounded, continues to expand. It grew at an annual rate of 2.8% in the second quarter.

Unemployment in the 1930s was staggering, above 20% for four years. In 1933, 24.9% of the labor force was jobless. Today, it's 6.1%.

The Dow is down 21% from its October 2007 high. That's less than it lost in the first two days of the rout that brought on the Great Depression.

Among poll respondents who don't buy talk of depression is Richard Dotson, 55, of Roscommon, Mich., who works for an air conditioning company.

"We're not in a depression," he says. "A depression is soup lines, is people sleeping in tents. The (political) leaders are exaggerating and trying to get people's attention."

But regardless of whether people think we're in a recession or a depression — or neither — Americans are changing their financial habits. Here's how:

Cutting back spending

Fifteen percent of those surveyed said they have postponed a major purchase because of economic uncertainty, and another 14% are thinking about it.

Erin Stephens, 42, a recent college graduate in Salt Lake City, thought this year would be a little easier for her family. Her husband is making 5% to 10% more than last year and her new degree in social work should have meant a job soon, but hasn't.

Instead, the family is eating out less, shopping less and planning less exotic vacations. She considered a trip to the Galapagos Islands, charging it on her credit card and paying it off later, but decided now's not the right time for such a big expense. Stephens and her husband also dropped plans to buy a cabin this summer.

"I was afraid to have the money out there," she says, "because now we're getting paid a little more but we're barely breaking even."

Stephens says she hasn't quite figured out why money feels so tight this year.

"I don't know. I was a little careless before, and I wasn't really budgeting myself," she says. "I was just kind of cruising along."

The economic problems this year were "a wake-up call," she says. "Now I'm concerned about it, and I watch what I spend."

Maintaining living standards

Twenty-four percent of Americans are "very" worried about maintaining their standard of living, double the percentage in April 2002. And 32% are "moderately" worried, up from 23%.

Doreen Mangels, a 44-year-old learning specialist from Old Lyme, Conn., says rising costs are squeezing her family's already tight income. A disability forced her husband to retire early a few years ago, and they might have to tap their 401(k) funds sooner than expected. Says Mangels, "I see our 401(k) accounts shrinking because of the financial crisis, and it makes me nervous."

Her biggest concern now is the coming winter. She's already putting away money to pay for higher home heating oil prices she expects this winter, and is looking to pick up more hours at work.

"We're trying to save money now, anticipating that we're going to have to lay out big sums later on for heating," she says. "We're cutting back on repairs we would do around the house. … We didn't take any vacations this year, and we haven't been to the movies or eaten out in months."

Mangels thinks her situation, due to her husband's disability, is not the norm, but, "Our personal story is exacerbated by what's going on in the whole country."

Affording retirement

Sixty-four percent of those surveyed are worried about having enough money for retirement. And the percentage who are "very" worried has risen to 33% from 25% in April 2002.

They've also grown more conservative in saving: 31% say the best long-term investment is a savings account or CD, vs. 16% in July 2002. It's the opposite for real estate: It went from 50% in 2002 to 26%.

Judy Perotti, 59, of Winsted, Conn., is an underwriting assistant. She is so concerned about the economy that she decided to delay retirement. High travel costs mean fewer trips to see her young grandchildren. And she's putting off purchases.

"We're in a depression. Just the way people are struggling to maintain homes, provide food for families. They're very cautious about how they're spending their money," she says. "I don't purchase anything unless it's essential. Before, I would buy something and not think about it. Now I'm worried about providing for myself."

Retirement anytime soon isn't likely, she says. "I had hoped to retire in the next year and see more of my grandchildren, but now I think that's not possible. I'll have to stay working. Maybe I'll retire at 65. A couple of years ago, I was confident."

Paying higher taxes

The vast majority of Americans surveyed — 72% — are sure about one thing: The financial bailout will mean higher taxes.

"I'm afraid someone will want to raise the federal tax on retirement income," says Richard Gallagher, 66, a retired schoolteacher from Cornelia, Ga.

He says rising gasoline and travel prices already are pinching his retirement. "We like to travel," he says. "We're supposed to go (on vacation), but unless I can locate (affordable) gas, we may not go."

Still, he is optimistic about the long-term health of the economy. "It's going to come around. This is not the time to sell your stock. I think we'll pull out of this. I first started teaching in 1966 and I earned $3,600 a year. So I've seen my station in life go up."

Losing job security

Only 26% of Americans are worried about losing their jobs, but 46% worry about benefit cuts and 44% worry that they'll earn less in the future.

Dan Egan, a 50-year-old former Marine who runs a pest-control business in Los Angeles, says it feels like the country is in a depression. While he's optimistic about his personal situation, he has family members and friends who have lost their jobs.

His brother was laid off from his job with the phone company; his sister was laid off as a teacher at a Catholic school. A friend who has owned a restaurant for 25 years has seen business fall off 50%, forcing him to lay off staff. "It's trickling through the whole system," he says.

But Egan keeps thinking about advice his parents gave him. "My mom and dad lived through the Depression," he says. "They said, during the Depression, it was the people who could work with their hands that made a living. I can do anything. I can fix things, I can build houses, I can do electrical, plumbing, I can fix cars."

Egan says he's not sure if the economy has hit bottom, but he's investing in something many people are running away from: real estate. He's looking at buying foreclosed properties.

Paying monthly bills

Forty-four percent of Americans are worried about paying monthly bills, and the anxiety is growing. Those who are "very worried" about paying their bills doubled to 20% from 11% in April 2002.

For 37-year-old Shauna Peterson of Las Vegas, high gas prices turned her world upside down.

She's been staying at home, caring for her baby daughter, and relying on her fiance's paychecks. Last year, they made ends meet. But when gas topped $4 a gallon, they could no longer afford to fill up his pickup so he could get to welding jobs.

Now they're struggling to come up with gas money for the 10-mile drive to social services to apply for help paying their rent. They've tried riding bikes, but their bicycles were stolen.

"No matter which way we seem to turn, it gets worse," she says. "The poor man is stealing from the poor man so he can get by. I can't necessarily shake my finger and say, 'Shame on you, you should go to hell,' because they're just trying to get by like we are. I try to keep my head up and stay positive."

The plan now is to leave Las Vegas for Oklahoma, where family will help them with jobs and day care. But first, they've got to raise gas money for the 1,000-mile drive. She is selling her 1985 Camaro, her fiance is selling a flatbed trailer and an engine hoist. Then, maybe, they'll have enough to go.

"Moving out of state," Peterson says. "That's about the only way we can solve our problems."

Now that sounds a bit like the Great Depression.

Contributing: Stephanie Armour, Sharon Silke Carty and David J. Lynch