Economic Confidence Returns Slowly to Shaken Americans
There’s a lot not to like about the United States right now. Five years after the worst recession since the Great Depression the U.S. economy is still weak. At 7.3 percent, the headline unemployment rate is both elevated and somewhat misleading. Declines in labor force participation have put downward pressure on the headline figures without actually increasing the number of employed people, while the average duration of unemployment has skyrocketed from about 17 weeks before the financial crisis to more than 36 weeks.
As a result of a weak labor market and a dozen other economic ailments, a malaise appears to have settled over the U.S. In November, Gallup’s index of economic confidence averaged -25, up from the -35 averaged in October but still a dismally low reading. The index climbed as high as -3 in June before beginning a summer-long decline that culminated in the fiscal impasse in Washington.
Gallup’s headline Economic Confidence Index is a composite of Americans’ assessment of current conditions and future expectations; it has a theoretical minimum score of -100 and a theoretical maximum of +100. At negative levels, the index suggests that more Americans are pessimistic about present and future economic conditions than are optimistic. The economic confidence index has averaged a weekly negative score since Gallup began reporting readings in January 2008.
Small business optimism has also remained extremely low over the past five years. The National Federation of Independent Business has tracked small business optimism since 1975. The organization’s index fell to 91.6 in October, slightly above the post-crisis average of 91 but still 8 points below the long-run average maintained from 1975 to 2007.
Politically, the country is doing even worse. According to Gallup surveys, the Congressional job approval rating fell to a record low of just 9 percent in November, down from 11 percent in October and 19 percent in September. This year to date, Congress has averaged a job approval rating of 14 percent, which is well below its long-term (1974 to 2012) average of 33 percent. This dysfunction has had a negative impact on the economy and Americans’ confidence in the beleaguered recovery.
“Washington paralysis is never good news for the economy, so it was no surprise that while politicians were arguing over whether or not the government should remain fully operational, small-business optimism measures deteriorated,” commented NFIB chief economist Bill Dunkelberg.
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