In periods of economic recession, negative mental health symptoms like depression, anxiety, panic attacks, and self-harm tend to increase, according to a study in Behavioral Sciences. Adverse changes in the labor market create wage cuts and layoffs. And for those who remain employed, decreased workplace safety standards and increased workloads are catalysts for poor mental health outcomes like worthlessness, anxiety, shame, and frustration.
“High inflation typically causes anger and frustration, especially toward elected officials,” says Jim Butkiewicz, macroeconomist and economics professor at the University of Delaware. “If wage and salary increases lag inflation, there will be unrest in the labor market, with demands for increased compensation.”
Data shows that the prices for everything from plane tickets to frozen vegetables are on an incline. Inflation hit a 40 year high in the U.S. in 2022 and skyrocketed at the fastest pace since 1981, according to the Bureau of Labor Statistics, and is a source of stress for 82 percent of U.S. adults. This soaring financial stress can provoke specific emotional or cognitive responses in consumers, none of which are typically positive.
How Does Inflation Impact Mental Health?
As prices increase, mental health tends to decrease as people struggle to contend with rising grocery and utility costs. According to the most recent data available from the U.S. Census Bureau’s Household Pulse Survey, more than 63 percent of Americans find it “a little,” “somewhat,” or “very” difficult to pay usual household expenses.
Economic recession impacts range from lack of employment and reduction in hours to housing loss, eviction, or bankruptcy. Unhealthy coping mechanisms like high-risk drug use and binge drinking then rise in tandem with recession-related hardships like unemployment. This indicates the large mental health toll that people can face during widespread economic hardships, according to a study from Clinical Psychological Science.
Read More: How to Improve Your Mental Health
Are We Currently in a Recession?
Economists predicted the risk of recession to be 25 percent probable in April 2022 to 65 percent probable in October 2022, according to a Reuters poll. The good news is that the textbook traits of a recession, like dramatic increases in unemployment levels, for 2023 and 2024 are not currently present.
In 2023, the national unemployment rate rose faintly from 3.6 percent to 3.7 percent, but overall the labor market remained stable, according to the Economic Policy Institute. Despite rampant fearmongering, unemployment has steadily fallen below 4 percent for the longest period since the 1960s.
Additionally, as of Nov. 2023, the Consumer Price Index – the monthly inflation rate for goods and services in the U.S. – was at 3.1 percent, reduced by over 50 percent as compared to the 7.1 percent rate in Nov. 2022, according to Statista.
“We are not in a recession, although a recession is still possible within the next six months,” says Butkiewicz. “Inflation continues to fall, and is getting close to the Federal Reserve’s target of 2 percent.”
Read More: The Emotional Psychology Behind Investing