The word 'recession' is coming up more frequently. But there can be silver linings
MICHEL MARTIN, HOST:
With inflation still high, gas prices looking to rise again and the Federal Reserve raising interest rates for the third time this year, forecasters are starting to use the R-word - recession - more freely these days. And, in fact, the Federal Reserve released new economic projections in September, showing that the economy is expected to slow down at the end of 2022 and into 2023. That's worrying to most people and will cause real pain to many. But our next guest, Washington Post personal finance columnist Michelle Singletary, says don't fear. There can be a silver lining in there somewhere. And she is with us now to tell us where to find it. Michelle Singletary, thanks so much for coming back once again.
MICHELLE SINGLETARY: Oh, thank you for having me again.
MARTIN: OK, Michelle, the idea of a recession happening naturally scares a lot of people. So how likely is it that a recession will happen, and how bad do you expect it to be?
SINGLETARY: Well, it's looking like it's likely that we are in a recession, but it's a different one because the jobs numbers are still strong and unemployment is still low. So we really won't know for a while whether we are in recession. But clearly, we are in an economic downturn. Clearly, inflation is high, and people are having to pay more for food and utilities and the car that they want to buy, whether it's new or used. So there is actual pain, whether it's an official recession or not.
MARTIN: You know, a lot of people write about people at one end or the other of the economic spectrum. And you are very focused on people in the broadest range of circumstances. So your recent column came as kind of a surprise. I mean, you wrote a column titled "7 Ways A Recession Could Be Good For You Financially." So tell us how.
SINGLETARY: Yeah, that was a very controversial column from a lot of people.
MARTIN: I can imagine.
SINGLETARY: And I love what you said because sometimes we do - it's all black and white. People are completely suffering - which there are lots of people suffering - or people are doing OK. But there is a range of folks. And so I wanted to write a column that says - you know what? - there are some people who are doing well because of some things that are happening as a result of the economic downturn. So, for example, housing. You know, lots of people have been shut out of buying a home. You go bid for a home and you're outbid. People - cash offers, you know, not wanting inspections 'cause everybody, you know - you getting 20 bids for house, which pushes the price up, so they've been priced out.
If we are in a recession, or at least the downturn, and the Fed raising rates means that, you know, mortgage rates are going up - and that is resulting in less competition for homes, which puts the buyer in the driver's seat. So for people who have the money saved - they've got good income coming in - housing prices coming down is good for them. Yeah, they've got to pay a little bit more for their mortgage and maybe they may have to look at a house that's less expensive than they did, but they can get into the housing market. And so that's a silver lining.
MARTIN: What about cars? For a lot of people, a car is an important part of being able to hold on to employment or get employment. And you're saying that, you know, used car prices, for example - talk about what the effect could be on that.
SINGLETARY: Yeah. So car prices are up. But on the flip side of that, if you are in the market to - maybe you want to upgrade. You've got the money to upgrade, and you've been looking at getting a different car. Or maybe your family has grown, and you need a different type of car. And you need to sell your own car, and it's in good condition. You're going to get a great price for that car. And so let's say you have a big car and you want to downsize. You can sell that - you know, that hybrid, that electric car, or that, you know, used car in good condition and get another car and get a good, you know, price for that.
MARTIN: And what about interest rates? You talked about people who are in a position to buy bonds or who have bonds as part of their portfolios or even people who are in a position to buy, say, certificates of deposit might actually do better in the current environment. Talk a little bit about that.
SINGLETARY: So because the Fed has been increasing rates, you know, interest rates on credit cards are going up, but guess what else - savings rates are going up. I got a notice from my credit union that was offering a 20-month certificate, which is a share certificate similar to a certificate of deposit, for 3%. Now, that's not a whole lot, but it's a lot better than what savers have been getting because the rate is a little bit more. Now, it's not keeping pace with inflation, but it's giving you a decent rate. And if you have a lot of money parked somewhere, you might be interested in a I bond. A series I savings bond was created as a hedge against inflation. And so - are you ready for this? - 'cause it's something that a lot of people don't know about. It's paying an eye-popping 9.62% right now, and it may actually go up. It resets - the inflation part of that resets in November, so it may actually even reach 10%.
MARTIN: Well, I think the overall message that I hear you saying is look at ways that - instead of just kind of getting stuck and being sad and upset, look for ways that, in your own individual way, that you can, if not thrive, at least do a little bit better. You know, don't just be a victim, is I guess, like, what I kind of think I hear you saying.
SINGLETARY: That's exactly right. Listen, what's so sad about this when I wrote this is people think that you are not acknowledging their suffering. That is not what I'm doing. I work with people who are, you know, making no money - unemployed - to people making, you know, high six figures. I see it all. And on that range are people who are completely devastated by the pandemic and recessionary things that are happening right now. But there is a great swath of America that is not suffering - that they're doing OK. They've got strong security with their job. They're traveling. I mean, you hear all these stories about - get your ticket for the holidays now. These people are - they're able to travel and vacation. Do they have to pay more? Sure.
But there are some things that have a silver lining, you know, because of the things that happened with the pandemic. We've got student loan forgiveness coming for many people, and that's going to free up a lot of money. The dollar is very strong right now. So if you're traveling overseas or you need to buy imported goods, you're going to be able to get more for your money. And so at any period where there is this kind of economic downturn, you certainly want to be empathetic to people who are struggling. It's important that when you look at this, that you also look at - that there's some good things that could come out of a very bad thing.
MARTIN: That is personal finance columnist Michelle Singletary. She writes a syndicated column for The Washington Post. Michelle Singletary, thanks so much for joining us.
SINGLETARY: Thank you for having me. Transcript provided by NPR, Copyright NPR.