Main Street is more sure than Wall Street a recession is coming

Main Street and Wall Street are often at a distance when it comes to the state of the economy. The likelihood of a recession hitting in 2022 is the latest example. Both camps are bearish, but small business owners are leading the way in negative sentiment — by a notable margin.

Wall Street has been consumed with the Federal Reserve’s efforts to combat the inflation it pegged wrong for too long, and the risk that interest rate hikes will lead to a recession. A survey earlier this week from CNBC found that more than half of economists and investment professionals expect the Fed to fail in its mission to engineer a “soft landing” for the economy. But the stock market breathed a sigh of relief on Wednesday, anyway, with stocks surging after Fed chair Jerome Powell said that a more aggressive rate hike of 75 basis points is not being considered, and that the central bank remains convinced it can bring inflation down without crashing the economy.

The market was also giving back some of those brief gains on Thursday, and on Main Street, the central bank messaging isn’t likely to cause any short-term relief. Eight in ten small business owners expect a recession to occur this year, according to the latest CNBC|SurveyMonkey Small Business Survey for Q2 2022. Inflation remains the top concern for small business owners polled by CNBC and their business outlook is negative. The survey finds few small business owners seeing any bright spots in the current economy: just 6% rate the current state as excellent and 18% as good, while 31% rate it as fair and 44% rate it as poor.

While the survey’s small business confidence index ticked up for the first time in the Biden administration due to responses on core index questions related to immigration policy and a 3 percentage point increase (to 36%) among small business owners who described their current business conditions as good, it remains near its all-time lows and well below its pre-pandemic baseline.

“There just isn’t a lot of optimism on Main Street these days,” said Laura Wronski, senior manager of research science at Momentive, which conducts the survey for CNBC.

Small business survey results can be influenced by politics, with the community skewing conservative, but economic worries are high among all small business owners. Those who identify as Republicans or lean to the GOP are leading the bearish outlook, with 91% expecting a recession, but among those who are Democrats or lean to the Democratic party, it is still 66% that expect a recession.

The survey was conducted by Momentive…