New Gallop Poll: Americans Feel the Economy is Getting Worse

All of a sudden, some investors, analysts, and commentators are getting the "feeling" that the economy might be "bottoming."

That is despite the fact that housing continues to slip-slide into a dark abyss, the employment "gains" we've seen in recent months have largely been due to statistical plug-factors, long-term interest rates are rising both here and abroad, chief financial officers and other senior executives are growing increasingly cautious in their outlooks, and an expanding list of historically reliable indicators is signaling tough times ahead.

To top it off, the group that would have to be at the forefront of this alleged turnaround - because they account for more than two-thirds of U.S. gross domestic product - is anything but upbeat about the future, according to Editor & Publisher, in a report entitled, "Gallup: 7 in 10 Americans Say Economy Is 'Getting Worse.'"

A new Gallup Poll will only reinforce those who claim that while the rich get richer most Americans don't feel they are sharing in the growth in our economy. The stock market may be climbing and the unemployment remains relatively low, but 7 in 10 Americans believe the economy is getting worse - the most negative reading in nearly six years.

Only one in three Americans rate the economy today as either excellent or good, while the percentage saying the economy is getting better fell from 28% to 23% in one month.

Gallup adds: "For the first time this year, a majority of Americans are negative about the employment market, saying it is a bad time to find a quality job."

The 70% negative rating is up 10 points since April. Also, just in the past month, there has been a significant five-point drop, from 28% to 23%, in the percentage saying conditions are getting better.

"When asked about the most pressing financial problems their family faces today, Americans mention healthcare costs, lack of money or low wages, and oil and gas prices," Gallup reports. "Healthcare costs are mentioned by 16% of Americans while 13% say low wages and 11% say oil and gas prices. These percentages are virtually unchanged from last month."

The survey of 1,007 adults was taken June 11 to 14.

Based on this, I'm wondering whether those who've been experiencing these warm and fuzzy "feelings" lately should get themselves checked out - before they start inflicting a great deal more harm onto themselves and others?

Comments

[huangjin:]

The general public is most negative about the economy right before it picks up, and they go on spending even as a recession is underway. It counts for nothing except that politicians will try to convince them that the other side is to blame. The blind leading the blind.

2007 Jun 20 08:28 AM

[Will Rahal:]

Matthew,
I have some charts that prove you wrong. There is a change in consumption taking place.
CPI is rising because of food and energy (less income for big-ticket items). For the first time in 50 years we had wages going up strongly(after the 2001 recession) and the consumption of Durable Goods as percentage of Personal Consumption declined.

2007 Jun 20 10:41 AM

[tradeorfade:]

I agree there are some troubling times ahead. However, Matthew's comments are correct. The results from the Gallup poll are the lowest since 9/11. These low readings usually mean further upside in the markets are ahead.

2007 Jun 20 10:56 AM

[Bob K.:]

To Willjrd, have you done any work on the persistency of inflation or how the Fed reacts to inflation when the core inflation is much lower than overall inflation? Your charts suggest to me that the Fed is behind the curve and the consumer is in a bind. Looks like a bit of stagflation to me. (also ironic if true, as both periods came about due to an unfunded war). Thanks

2007 Jun 20 02:13 PM

[Will Rahal:]

Bob,
You probably noticed how closely correlated CPI is, to Non-Durable Goods as percentage of PCE.
It is hard to tell them appart! So the Fed is in a real bind. Core CPI can only be used for so long. The CPI
(with food and energy inflation) cannot be looked upon forever, as some pesky bug. CPI is truly diminishing the capacity of the consumer to buy durable goods items. This has a significant effect on manufacturing(domestic... or abroad)

2007 Jun 20 04:28 PM

[huangjin:]

I'm not convinced that food and energy are undergoing inflation, because government policies are responsible for the high gas and food prices. If Washington allowed more refining and cut the ethanol subsidies, gas and food prices would drop.

willjrd, I didn't say the economy isn't in trouble. I just find poll data near worthless, for obvious reasons of economic ignorance and irrational reactions to prices of certain goods, like gas. But more importantly the vagaries of the job market are such that peoples' personal experience is useless at inflection points. They lose their jobs once the recession is underway and they get them back after the boom has begun.

2007 Jun 20 04:59 PM

[huangjin:]

There are also polls that ask people if they think the economy is good, and a majority say no. Then they are asked "are you better off than you were last year?" A majority say yes. I haven't seen an example of that lately, but the fact that it happens just makes me think the polls don't prove much.

2007 Jun 20 05:07 PM

[Bob K.:]

To Matthew, I would agree with your scenario, but cannot see it happening politically. The left won't let more refineries get built, and now the farmers will not let the ethanol gravy train slip away. Plus, China and India are going to suck up all excess soft commodities to keep their middle class calm.

2007 Jun 21 12:46 PM

[LeeCarlson:]

Too bad that most people just look at polls and charts and not facts !
Fact,..we have way too many dollars going out ,..overseas,..and all the jobs are going overseas, and the dollar is dropping like a rock, ...anyone ever look at the exchange rates between the US dollar and the Canadian dollar lately Or the Euro and the dollar,...they used to be equal, but now the Euro costs $1.30 ,..approx. ...meaning that other countries are accumulating dollars that have less and less value, but no one seems to care,..One day,.. after the Fed finds that they can't run the printing presses fast enough, people will wake up only to find that the rest of the world is going to own every company in the US and really don't have any use for us except for Disneyworld winter homes, and the National parks !
....We really need to enter a true free trade policy that mandates "FAIR" trade, meaning if we buy a dollars worth of foreign goods, then the Foreign countries must buy a dollars worth of our goods and services.
Continuing our present ways is a sure way to a complete melt down of our economy ! L.C.

2007 Jun 23 12:47 PM