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Many Americans are wrong about key economic trends. Take this quiz to test your knowledge.
Americans have been notoriously glum about the country’s financial outlook in the post-pandemic years, with only one-third describing the economy as good in a CBS News poll earlier this year.
But increasingly, there’s a gap between how a large portion of Americans think the economy is performing and what key indicators show — a dissonance that some describe as a “vibecession.” In part, this disconnect reflects the limitations of economic measurement, which often doesn’t capture the financial realities facing millions of Americans.
That said, when asked about key economic trends and data, upward of half of Americans are getting the facts wrong about some basic financial issues, according to a new poll from Harris/The Guardian.
Think you have an accurate read on the state of the U.S. economy? Answer the following four questions to find out.
Is the U.S. in a recession?
A) Yes
B) No
Answer: The correct answer is B. As commonly defined by economists, a recession is a slump in economic activity, or when GDP is negative. As the GDP has been growing — fueled partly by strong consumer spending — at rates that have exceeded economists’ expectations, the U.S. economy is not in a recession.
What Americans believe: About 56% of those polled by Harris/The Guardian said that the U.S. is currently experiencing a recession.
How has the S&P 500 index performed in 2024?
A) Stocks are up for the year
B) The stock market is down for the year
C) The market is unchanged
Answer: The correct answer is A. The S&P 500 — a proxy for the broader stock market — has climbed 11% this year.
What Americans believe: About half of people polled by Harris/The Guardian said the stock market is down for the year.
How does the current unemployment rate compare with prior periods?
A) The unemployment rate is now near a 50-year low
B) The unemployment rate is near a 50-year high
C) The unemployment rate still hasn’t recovered from the pandemic
Answer: The correct answer is A. The jobless rate stood at 3.9% in April, near a 50-year low. Current unemployment numbers are also similar to levels experienced prior to the pandemic, indicating that jobs lost during the crisis have been recovered.
What Americans believe: About half say unemployment is near a 50-year high.
Is inflation increasing or decreasing?
A) Inflation is rising
B) Inflation is falling
C) Inflation isn’t changing
Answer: The answer is B. Inflation, which measures the rate of change in prices, has been declining since reaching a peak of 9.1% in June 2022. In the most recent CPI reading, inflation was 3.4% in April.
What Americans believe: About 7 in 10 responded that they believe inflation is rising, the Harris/Guardian poll found.
Are prices still rising? Yes. Although inflation — the rate at which prices are changing — is falling, prices are still moving higher. The decline in inflation simply means those price increases are moderating from the large increases experienced in 2022.
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Inflation has been cooling and that’s a sign that the Federal Reserve could cut its federal funds rate soon. The Fed adjusts this benchmark rate in response to economic developments. And, many experts agree that a rate cut will happen at some point before the end of the year.
That’s important because changes to the federal funds rate are typically followed by changes to the interest rates financial institutions charge consumers for borrowing money and pay them for depositing it. If the Fed does cut its federal funds rate, you could earn less on deposits, but pay less on loans.
And, you should consider the prospect of a coming rate cut as you make financial decisions. We’ve outlined a few things you should do and a few you shouldn’t with a potential rate cut looming below.
Take advantage of today’s high CD rates here now.
3 things to do (and 3 things to avoid) before interest rates are cut
With a potential rate cut ahead, there are a few financial moves you should make now:
Open a CD
With rates expected to fall ahead, using a certificate of deposit (CD) to lock in today’s high returns may be an advantageous move. These are fixed-rate deposit accounts that guarantee the rate you lock in for the entire term.
Of course, you typically have to guarantee that you’ll keep the money in its account for the entire term, too. You may be penalized if you access your money before the account matures. Nonetheless, CDs give you a compelling way to lock in today’s high rates for anywhere from a few months to several years. And, that’s valuable with a potential rate cut looming.
Don’t wait for rates to fall. Lock in your CD returns now.
Choose a HELOC over a home equity loan
Do you plan on tapping into your home equity? Home equity loans and home equity lines of credit (HELOCs) are two common options to choose from. But with the prospect of a rate cut ahead, it may be best to choose the latter.
HELOCs typically come with variable rates while interest rates on home equity loans are usually fixed. And, with a potential rate cut ahead, opting for a variable rate over a fixed rate could offer meaningful long-run savings.
Limit your variable-rate savings exposure
Savings accounts offer more flexibility than CDs – making it possible to access your money when you need it. That’s important for your emergency savings. But, with an expected rate cut looming, you should limit your variable-rate savings exposure. Think about how much money you need in your emergency savings and consider locking in a strong fixed rate of return on the rest of your money with a CD.
“Aim to save enough to cover three to six months’ worth of expenses to cushion against unexpected financial setbacks,” explains Justin Stivers, financial advisor and founding attorney at Stivers Law, an estate planning and asset protection law firm. But, once you have that amount in a variable-rate deposit account, like a high-yield savings account, you should consider opening a CD with your remaining savings to lock in today’s rates.
3 things to avoid before interest rates are cut
Although there are a few things you should do with a potential rate cut head, there are also a few financial moves you should avoid, including:
Focusing on short-term CDs
When you open a CD, you can choose short-term or long-term options. Short-term options typically mature within a year while long-term options often take several years. With a potential rate cut ahead, and interest rates high at the moment, it may be best to lock in today’s high rates for multiple years rather than opting for short-term options.
Selling your gold holdings
The potential for a rate cut is tied to the fact that inflation has been cooling. And, since gold is a strong inflation hedge, you may be tempted to sell your gold investment. But, inflation isn’t the only reason you should have gold in your portfolio.
Gold is a safe haven – not just as it relates to inflation, but also against other market risks. Between the current geopolitical stage and the coming election, it’s a good idea to maintain a healthy exposure to safe havens. So, selling your gold holdings could be a mistake.
Lock in a fixed mortgage rate
If you’re in the market for a new home, you may be weighing your fixed and variable-rate options. But, with rates expected to come down ahead, an adjustable-rate mortgage (ARM) may be a better option than its fixed-rate counterpart. If you opt for an ARM you could benefit from future rate cuts more quickly versus having to refinance with a fixed-rate loan.
Learn more about your mortgage options today.
The bottom line
It’s important to adjust your financial plan when rate cuts are expected. Those cuts can impact your savings returns and the cost of borrowing money. But, you can protect your returns by opening a long-term CD with a fixed interest rate. Also, limit your variable-rate savings exposure. If you plan on borrowing money against your home equity, or buying a new home, consider variable rate options as they may produce savings later. And, don’t start selling your gold holdings just yet. They may provide valuable protection against market risks outside of inflation.
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A U.S. citizen who was a representative of a drone company doing business with the Israelis has been wounded in Israel, after the Hamas-aligned militant group Hezbollah fired missiles toward Israel, U.S. officials tell CBS News national security correspondent David Martin.
A spokesperson for the U.S. State Department confirmed that an American civilian was injured, but didn’t offer further details. The U.S. Embassy in Jerusalem is assisting the injured American and the citizen’s family, the spokesperson said. The U.S. government has repeatedly urged Americans to stay away from the region because of the ongoing Israel-Hamas war.
“The department reminds U.S. citizens of the continued need for caution and increased personal security awareness throughout Israel and the West Bank, as security incidents often take place without warning,” the State Department spokesperson also said.
Fears about the possibility of war between Israel and Lebanon’s Hezbollah have grown after an Israeli airstrike killed a senior Hezbollah commander last Wednesday. Israel said the commander, Mohammad Naameh Nasser, was responsible for firing rockets into Israel. Hezbollah responded with another barrage of rocket fire. Like Hamas, Hezbollah is backed by Iran but is believed to be larger and better armed.
Holly Williams, Omar Abdulkader, Margaret Brennan and Olivia Gazis contributed to this report