Americans worry about economy, despite rate cut

CINCINNATI (Reuters) - Americans are worried about the economy and fear housing woes and war spending could spark a recession, despite the interest rate cut this week that sent stock markets soaring.

Many people interviewed echoed findings of a Reuters/Zogby poll released on Wednesday that showed one in three Americans expects a recession in the next year, with some even raising the specter of a 1930s-style Depression.

"We're beginning to use the D-word, not just the R-word," said Chris Gibbons, 63, a housing finance consultant enjoying a morning coffee outside a Cincinnati Starbucks.

"An interest rate cut at this point is the worst thing they could do. You can't convince us inflation isn't going crazy. Starbucks has raised prices twice lately. Ever try to buy orange juice? Prices are going up and up," Gibbons said. "The economy is in the toilet."

While U.S. and global stock markets rallied after the Federal Reserve's half-point rate cut on Tuesday, recent reports show the U.S. economy lost jobs in August and housing markets continue to suffer amid a subprime mortgage crisis.

"It's getting worse," said Colleen Domain, a Boston administrative assistant. "My daughter just bought a house and we're worried about that. The cost of living in Boston is just unbelievable."

She added: "Things are not going to get better while we're spending all this money in Iraq."

The cost of the war was a common complaint.

"The war in Iraq is definitely hurting," said Miami Beach high school student Keala Flores, 17, who works part-time at a clothing store.

"The president is (at fault). He should be doing more for this economy," Flores said. "There aren't very many jobs, even part-time jobs, for young people."

Some said while they felt good about their personal finances for now, they feared for the future.

Linda Harmon, a 46-year-old nurse in Overland Park, Kansas, said a cautious attitude toward spending and saving had helped keep family finances secure. Still, she was nervous.

"I just keep waiting for things to fall apart," said Harmon. "Food prices and household necessities have definitely increased ... I am concerned for people with large amounts of debt in comparison with their income. Greed -- that's the best word I can come up with to describe what has deteriorated our overall economic outlook."

In Atlanta, IT director Bill Paraska said rising costs would make it more difficult to retire as soon as he'd hoped.

"I feel less comfortable. I don't see any real growth in the economy. I see a whole bunch of service-related jobs being created but I don't see real industry being created," he said.

Concern about the housing market, which has floundered after years of booming prices and sales, was widespread.

"The housing thing is a mess. There are three houses for sale on my block and they're not selling. My own son is in trouble," said Chicago elevator repairman Ed Rudek, 64.

SOME SIGNS OF OPTIMISM

Still, some said they weren't worried about the economy and cheered the interest rate cut and stock market recovery.

"This is good for my 401k (retirement plan), it's going to raise my stocks. I'm cautiously optimistic about the economy ... I think the rate cut is going to trickle down," said Dallas security guard Kenneth Price.

Rael Rogalski, 39, a manager at Mail Boxes Etc. in Lake Forest, Illinois, was also optimistic.

"I feel good. I can afford to live in a house and have a roof over my head. I'm not starving. And I guess I'm lucky to have a job," Rogalski said.

In New York, 70-year-old retiree Nat Hendricks said he wasn't particularly worried about his financial situation either, but criticized President George W. Bush for spending too much on the war and said quality jobs were scarce.

"Bullets don't go back into the economy -- they're gone," said Hendricks, cleaning the sidewalk in front of the building he owns in Brooklyn. Still, he shrugged off recession worries.

"I've been through a lot of recessions -- a lot of hard times.... There are always corrections. Boom, bust, boom, bust. That's how it goes."

(Additional reporting by Scott Malone in Boston, Jim Loney in Miami, Carey Gillam in Kansas City, Matt Bigg in Atlanta, Andrew Stern and Brad Dorfman in Chicago, Ed Stoddard in Dallas and Michael Erman in New York)