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.