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Recession Fatigue

RECESSION FATIGUE

SOME CATEGORIES CONTINUE TO GENERATE SALES WHILE OTHERS SHOW SIGNS OF CONCERN

By Michael Barbara, PhD

After more than two years of economic uncertainty, many Americans are finding it challenging to be financially disciplined ahead of another downturn.

A recession is a real possibility.

As the Federal Reserve aggressively raises rates to combat persistent inflation, the tough stance could come at a price. Falling stock markets have erased more than nine trillion dollars in wealth from U.S. households. Fed Chairman Jerome Powell warned the central bank’s upcoming moves to fight soaring prices may cause “some pain” in the months ahead.

Thirty-one percent of Americans self-report they are not equipped for an economic downturn and are not actively doing anything to better prepare for a recession. Recession fatigue is the exhaustion that occurs when preparing for an economic downturn during an extended period of time with ongoing uncertainty about what to expect. Moreover, recession fatigue is the awkward cousin of revenge spending. Americans were deprived of many activities that brought them joy. This could be defined as financial apathy. 

Recession fatigue can cause problems for Americans because it could prevent them from taking suitable measures to protect themselves in a more substantial downturn (think padding emergency funds, de-risking certain short-term investments, and minimizing debt). Marketing managers in mature markets are faced with the Herculean task of improving the sales and profit performance of their brands. Various pundits have predicted the imminent demise of once-powerful brands such as FTX, AMC, and Bed, Bath, and Beyond due to the virulence of the economic crisis.

Economists and other observers of the U.S. economy have been waiting for consumers to cut back on spending, especially given the decline in real incomes as wages have failed to keep pace with inflation. The Federal Reserve has likely awaited a slowdown or decline in consumer spending as it seeks to slow the economy sufficiently to stifle inflation. However, consumers keep spending. The US government recently released data indicating that retail sales (which is mostly consumer spending on goods) continued to grow at a healthy pace in November 2022, despite the headwinds faced by households.

Retail sales (not adjusted for inflation) were up 1.3% from the previous quarter and 8.3% from a year earlier. If this is adjusted for inflation, it implies that real spending was up 0.8% from the previous quarter and up 0.5% from a year earlier. During five of the previous 10 months, real retail sales were down from the previous quarter. The real increase in Q4CY22 was the strongest since Q1CY22. This hardly suggests an economy on the verge of recession.

Looking at the Q4CY22 increase in nominal (not adjusted for inflation) retail spending by category, spending was up 1.3% at automotive dealers, up 1.1% at both furniture retailers and home improvement retailers, up 1.4% at grocery retailers, up 1.6% at restaurants, and up 1.2% at nonstore retailers. Part of this growth was due to inflation (especially in the grocery category). Rising gasoline prices meant spending at gasoline stations was up 4.1% from the previous quarter. In contrast, spending at electronics stores fell 0.3%, spending at department stores fell 2.1%, while spending at apparel stores remained unchanged.

The strength of spending on furniture and home improvement is surprising given the weakness of the US housing market. These categories will likely face headwinds in the coming months as housing activity continues to falter. The drop in electronics is not surprising, given that people are leaving the house again and no longer spending furiously on home technology.

The strength of the retailing industry implies that consumers continue to save less and dip into their accumulated savings. Moreover, recent data indicates an increase in credit card debt. This means that consumers are intent on avoiding a cutback in spending. The big question is whether this trend will continue in Q1 and Q2CY23. If spending is weak, retailers might have limited options, which include deep discounts to dispose of inventory, thereby suppressing inflation.

For the Federal Reserve, the latest retail spending data implies that Fed tightening has not yet had a significant impact on the consumer sector, which is the largest part of the economy. If the Fed believes that the economy needs to decelerate further to stifle inflation, then it will feel compelled to continue raising interest rates. Monetary tightening is often effective with a lag. It is possible the Fed has gone far enough and could wait to see how the market reacts. There is debate about this strategy among economists. Fed leaders have suggested that more tightening is needed, yet perhaps at a less furious pace.

Shopping behavior is shifting as consumers not only look for deals and promotions, yet make fewer trips to the store or shop online, likely to avoid expensive fuel. Increasingly, consumers are attempting to save by cooking at home rather than ordering takeout or going to restaurants. Increasingly, quarter over quarter, discount retailers and online marketplaces have experienced a surge in spending at the expense of official store websites since Q1CY22.

Consumers expect to decrease spending on nonessentials such as clothing, increase deal hunting, and substitute lower-cost brands and alternatives. The category that consumers most consistently point to as an area where they are likely to reduce their spending is clothing. While the majority of consumers plan to rein in their spending on nonessentials, many high-income consumers show signs of increased spending in discretionary categories, several consumer behavior studies suggest the recession has a mixed effect on this group.

Real services spending has returned to the pre-pandemic trend, yet performance varies by category and is subject to future finances. Consumers are spending more on select experiences like restaurants and travel. Real spending on other forms of recreation and entertainment (such as sporting events, movies, and museums), health care services, personal care, and motor vehicle services are struggling to return to pre-pandemic levels. Some laggards are highly discretionary or have lower cost substitutes such as streaming services or public transportation.

Consumer confidence is showing deepening cracks, according to The Conference Board’s Consumer Confidence Index. The gauge slipped for a third consecutive month in Decembe 2022, spurred by declining perceptions of both the present situation and expectations for the following six months. Consumers’ views of current business conditions and employment are softening. That is notable because they had a favorable outlook during Q2CY22, likely because most adult Americans have been working and enjoying rising wages. Stock market volatility, tech sector layoffs, and inflation have made them less sanguine. A troubled economy and falling stock prices are troubling news for business and job security.

When segmented by generation, younger adults, or Gen Zers, are more likely to experience “recession fatigue,” compared to millennials, Gen Xers, and baby boomers. Younger adults are also the group that tend to say that the pandemic interrupted their formative years and feel slighted by a short-lived hot-vax summer. 

Whether it’s at gas pumps or in grocery stores, people across the United States have been feeling a pinch in their pocketbooks this summer. Inflation is the highest it’s been in decades, and consumers are worried and jittery, adjusting how they spend and save.

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      MASTER SERVICES AGREEMENT

      LAST UPDATED AUGUST 6, 2019

      This Master Services Agreement (“Agreement”) is entered into this day by and between Clicksuasion Labs. (“Clicksuasion”), 293 Olmsted Blvd, Second Floor, Pinehurst, NC 28374, USA, on behalf of itself and its owned and operated affiliates, and (“Client”), in the delivery of consulting and other professional services, collectively the “Parties”   This Agreement shall remain in full force and effect until terminated by either party with 30 days’ written notice.

      1. DEFINITIONS:
      • “Services” means any products and services that are requested by Client, whether electronic, written or verbal to Clicksuasion.
      • “Website” collectively refers to all Internet websites and domains owned by Clicksuasion.
      • “Exploratory”, “Discovery” means all communication, whether electronic, written or verbal with the intent to agree upon a SOW.
      • “Client” means any person or entity who requests Services or engages in Exploratory or Discovery communication with the intent to hire Clicksuasion Services.

       

      1. SCOPE: “Clicksuasion” shall provide consulting, research and other professional services to Client or to Client’s clients.

       

      1. WORK ASSIGNMENTS: The specific services to be provided by Clicksuasion shall be described in one or more Statements of Work (“SOW”) (or “Proposal”) issued pursuant to this Agreement and agreed upon in writing by the Parties prior to the termination of this Agreement, except where mentioned in paragraphs 5 and 16. The SOW shall be incorporated herein by reference and all terms and conditions of this Agreement shall apply to the SOW as if fully set forth therein. The SOW shall include a summary of the work, skills required, fees to be paid, and instructions on reimbursable expenses.  In the event of any conflict between the contents of any SOW and this Agreement, the SOW shall govern.

       

      1. USE OF CLICKSUASION WEBSITES: visit TERMS OF USE: clicksuasion.com/termsofuse

       

      1. INVOICING AND PAYMENT: We will invoice Client at the beginning of any project and when stated in the SOW. Unless otherwise stated, invoiced charges are due net-thirty (30) days from the invoice date. Client is responsible for providing complete and accurate billing and contact information to Clicksuasion and promptly notifying Clicksuasion of any changes to such information, including, without limitation, Client’s obligation to promptly report any Services-related performance issues or problems negatively impacting Client’s satisfaction with the Services so that Clicksuasion may attempt to remedy such. For clarity, if Client fails to notify Clicksuasion of a Services-related issue within five days from incurring it, such issue may not be relied upon as a reason to terminate this Agreement for Cause. In the event that payment is made via a third party agent, Client shall indemnify Clicksuasion and keep Clicksuasion indemnified against any loss, damage, costs and expenses Clicksuasion may suffer or incur as a result of any default by the third party agent in making payment in accordance with the terms of the SOW or as otherwise set forth in this Agreement. Client further authorize Clicksuasion to use a third party to process payments, and consent to the disclosure of your payment information to such third party. Clicksuasion shall invoice Client for fees and direct out-of-pocket expenses incurred as per the SOW. Payment in full is due upon completion of work or if other arrangements have been made between Clicksuasion and Client. Invoices unpaid after 15-days shall incur a late fee of 24 percent per annum until paid in full. Billing shall be on a time and materials basis.  Client’s non-payment of any Invoice shall entitle the Clicksuasion to stop performance under the terms of this Agreement, any Amendments thereto and/or any SOW without recourse by Client. Client is responsible for all fees and damages associated with the collection and legal solutions of late payments. All non-disclosure agreements between Client and Clicksuasion are void upon the first aged invoice 30-days past due. Additionally, the non-disclosure agreement must be re-signed by both parties to be effective beyond the first aged invoice 30-days past due. If any amount owed by Client under this or any other agreement for Clicksuasion services is thirty or more days overdue, Clicksuasion may, without limiting Clicksuasion’s other rights and remedies, accelerate Client’s unpaid fee obligations under such agreements so that all such obligations become immediately due and payable, and suspend Client Services until such amounts are paid in full. Clicksuasion will give Client at least seven days’ prior notice that the Client account is overdue before suspending services to Client.

       

      1. ENGAGEMENT NOTICE: A request for services, whether electronic or verbal, to members of Clicksuasion and the acceptance of the request of services from Clicksuasion will constitute a signed writing. All requested services, without a signed agreement, are billed monthly at $490.00 USD per hour. Client is subject to a $270.00 USD charge upon two consecutive missed meetings, whether electronic, telephonic or in-person, regardless of geographic location. Clients with ten (10) or less full-time W2-structured employees are billed $10,000.00 USD to be held in escrow for discussions related to research. All monies held in escrow will be billed at $490.00 USD during the exploratory process and all remaining funds, if applicable, will be returned to Client upon completion of the SOW or after an agreement is signed between both parties to cancel the SOW, whichever is first.

       

      1. VENDOR NOTICE: No employee of Clicksuasion has the authority to conclude any binding contract without an explicit ink-signed consent by the Chief Behavioral Officer. Therefore, any will to enter into an agreement must be confirmed by the Chief Behavioral Officer.

       

      1. INDEPENDENT CONTRACTOR: The Parties recognize and agree that Clicksuasion is an independent contractor. This Agreement is not to be construed to create an employment relationship between Client and Clicksuasion’s employees or subcontractors. This Agreement does not authorize either party to enter into any commitment or agreement binding on the other party. Clicksuasion shall have sole responsibility for the payment of salary (including withholding of income taxes and social security), worker’s compensation, disability benefits, and all other applicable taxes for its personnel.

       

      1. CONFIDENTIAL INFORMATION: Each Party agrees not to directly or indirectly disclose to third parties any of the other party’s confidential or proprietary information without the written consent of the disclosing party. Neither party shall, during the time the Clicksuasion is rendering services to the Client or any time thereafter, disclose to anyone other than authorized personnel any information of a confidential nature, including but not limited to, information relating to: any materials or intellectual property supplied by one Party to the other Party; either Party’s projects or programs; the technical, commercial or any other affairs or acts of the other Party or any confidential information which either Party has received from a third party and which has been identified as confidential. The restrictions contained in this Agreement are intended to cover confidential information which relates to the Parties’ respective businesses and which has not been otherwise made public but shall not apply to the dissemination which may be required by proper government or judicial inquiry. Likewise, confidential information shall not be deemed to be information which is in the public domain or which at some future point become available in the public domain. All non-disclosure agreements between Client and Clicksuasion are void upon the first aged invoice 30-days past due. Additionally, the non-disclosure agreement must be re-signed by both parties to be effective beyond the first aged invoice 30-days past due.

       

      1. WORK PRODUCT RIGHTS: Clicksuasion shall retain all rights, title, interest and ownership in the work product delivered pursuant to this Agreement, any Amendments thereto and the SOW as well as the Clicksuasion’s proprietary tools and methodologies which shall remain the sole property of Clicksuasion. For work product produced under the terms of this Agreement, upon payment in full of Clicksuasion’s Invoices, Client shall be granted a paid up, non-exclusive, irrevocable, world-wide license for all such work product to reproduce, distribute copies to the public and prepare derivative works by or on behalf of Client. Client agrees to permit Clicksuasion to publish Client data and case studies, without personally identifiable information, and without distribution of confidential information, for the purpose of advancing behavioral science via academic journals and Clicksuasion websites and distribution channels.

       

      1. TAXES: Client shall be responsible for all federal, state, and local sales, use, privilege, or excise taxes assessed on the charges to Client’s end users in relation to services provided hereunder (if Client is a tax-exempt organization and therefore there may be no taxes). Clicksuasion shall be responsible for all federal, state, and local sales, use, privilege, or excise taxes assessed on Clicksuasion’s income for these services.

       

      1. CLIENT LIST: Client agrees that Clicksuasion may include Client in its published client list and may display Client’s logo and trademark in its marketing materials and public relations; provided such use conforms to Client’s logo and trademark standards as such standards are provided to Clicksuasion.

       

      1. NON-SOLICITATION: During the term of the applicable SOW and for one year thereafter, neither Party shall solicit, entice, offer employment, retain or hire the other Party’s employees or contractors, without the written agreement of the other Party; nor shall Clicksuasion solicit or enter into a direct contract with Client’s client without the written agreement of Client.

       

      1. WARRANTIES: Clicksuasion warrants that the Services to be provided under this Agreement shall be performed in a professional manner conforming to generally accepted industry standards and practices. Client agrees that Clicksuasion sole and exclusive obligation with respect to the Services covered by this limited warranty shall be, at Clicksuasion sole discretion, to correct the nonconformity or to refund the Services Fees paid for the affected Services.

       

      1. TERM OF AGREEMENT: This Agreement commences on the date Client executes the SOW or requests service, whichever is first, or Client access any Clicksuasion Services and this Agreement continues until all services granted in accordance with this Agreement have expired or been terminated.

       

      1. TERMINATION: This Agreement may be terminated or amended at any time only upon written agreement by both parties with 30-days written notice; however, all payments made to Clicksuasion and the rights and obligations which by their nature are intended to survive such expiration or earlier termination shall survive, including without limitation warranty, limitation of liability, and confidentiality. Client may request that Clicksuasion reassign any of its personnel assigned to a SOW upon Clicksuasion’s receipt of Client’s written notice.

       

      1. LIABILITY FOR LOSS: Neither Party shall be responsible for any consequential, indirect, punitive, incidental, or special damages arising under any theory of recovery. The maximum liability of either Party is limited to fees paid by or payable to Clicksuasion for Clicksuasion’s services. Client acknowledges that Clicksuasion shall not be responsible for damages or delays of any kind or type caused by labor strikes, fires, wars, acts of God, terrorist activities, the inability to obtain supplies or materials or any other causes or forces beyond the control of the Clicksuasion. Client acknowledges that such events may delay the start, progress and/or the completion of the work.  Moreover, Client acknowledges and agrees the Clicksuasion shall have no further liability upon Client’s receipt of Services.  Client also acknowledges and agrees that any changes made to the website by Client’s personnel and/or by third parties which require the Company to do additional work after delivery of Services shall be billed by Clicksuasion to the Client on a time and materials basis.

       

      1. WAIVER: No delay or failure by either Party to exercise any right or remedy will operate as a waiver thereof.

       

      1. SEVERABILITY: If any part of this Agreement shall be held invalid or unlawful for any reason, the same shall be deemed severed from the remainder thereof and it shall in no way affect or impair the validity of the Agreement, any Amendments thereto and/or the SOW.

       

      1. ASSIGNMENT: This Agreement may not be assigned or transferred by either party without written agreement of both Parties, which assignment shall not be unreasonably withheld, qualified or delayed.

       

      1. GOVERNING LAW: This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without reference to any principles of choice or conflicts of laws. Any action instituted by either party arising out of this Agreement, the SOW or the Proposal shall be litigated exclusively in Moore County, North Carolina.  The Parties expressly consent to the exclusive personal jurisdiction and venue of Moore County, North Carolina.

       

      1. COSTS OF ENFORCEMENT: If a suit, action, arbitration, or other proceeding of any nature whatsoever is instituted in connection with any controversy arising out of this Agreement, or to interpret or enforce any rights under this Agreement or the North Carolina Limited Liability Company Act, Clicksuasion may recover attorney’s fees and costs.

       

      1. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement and supersedes all prior understandings between the Parties. Any change to this Agreement shall be in the form of a written Amendment signed by both Parties.  In the event of a conflict between this Agreement and the signed Amendment, the Amendment shall control.

       

      1. JOINT DRAFTING OF AGREEMENT: The Parties expressly agree that this Agreement was jointly drafted and that both Parties have had the opportunity to negotiate terms and to review the terms prior to the execution of this Agreement. This Agreement shall be construed neither against nor in favor of either Party but shall be construed in a neutral manner.

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