How Scared Are Americans of Job Losses?

When I was a kid, it was called "Chinese whispers". Today I believe it's called "Telephone". Either way, it's a game where you start with something like this:

A majority of Americans, 55 percent, say they are just making ends meet, with more than 6 in 10 concerned that someone in their household might lose his job in the next year.

And it comes out, a few days later, like this:

Over six in ten Americans think that someone in their household will lose their job in the next year. That means six in ten people won't buy anything other than basics. The economy comes to a full halt even worse than now.

It's entirely reasonable for any household -- with the possible exception of the one at 1600 Pennsylvania Ave -- to be concerned about a possible redundancy this year. But that's a long stretch from positively believing that it is going to happen.

Right now, unemployment is at 7.6%, or 11.6 million individuals. Let's say the worst-case scenarios come true, and it spikes all the way up to 10%. That mean another 2.8 million people or so being added to the unemployment figures on a net basis; let's call it 4 million on a gross basis. There are 105 million households in the US. So even in a worst-case scenario, the chances of any given household suffering a job loss this year are slim. They're far too high, but they're slim.

What's more, not everybody who expects to lose their job immediately cuts back their spending to basics only. Some people do; others don't.

There are lots of reasons why people are cutting back spending right now, and fear of unemployment is only one of them -- and not even the most important one. The fact that many people don't have any more access to credit is surely a much bigger factor, and consumer-price deflation plays a very important role as well. So yes, the animal spirits of the US are weak. But they're not as weak as all that.