Consumer confidence as measured by the Conference Board fell sharply this month. The “Present Situation” index fell to a 27-year low at 19.4 points because of the troubled job market and general business conditions. The figure was last below that in February 1983.
The figures sent the market down, as well they should have. Most of the Conference Board February numbers moved back to where they were at the depth of the recession, or even lower to the depths of the only other recession since the 1930s when unemployment was above 10%. The jobless numbers were in double digits for the ten months from September 1982 to June 1983. Unemployment was above 8% for 27 consecutive months.
Former Federal Reserve Chairman, Alan Greenspan, told the Credit Union National Association’s Governmental Affairs Conference that the recession that just ended was over primarily because high-income consumers and large businesses benefited by the sharp improvement in the stock market. He described it as an “extremely unbalanced recovery” which remains encumbered by problems, particularly banks tightening credit for small businesses and consumers. This in turn has slowed the housing and auto markets.
What Greenspan said would not lead anyone to think that he believes the economic situation is about to improve sharply. He made a point of cutting the effects of the recovery into two pieces—the “haves” and the “have-nots”. There is no bright horizon for the average citizen who lives with a mortgage worth much more than his home and the concern that he may be out of a job soon. A new Gallup poll showed that 61% of people who are unemployed are not hopeful about finding work in the next four weeks. That makes sense. Too many people are chronically unemployed because so much of the American manufacturing base was destroyed over the last decade, much of it before the recession began, and will not be built back—ever. Wall St. executives may have made as much in 2009 as they did in 2007, but no one else did, and a lot of people are making less.
Small businesses are not hiring and they will not, so long as a threat looms that the economic recovery will stall if the economy has really improved at all. That is the “disconnect” between mainstream economists and normal working people. The person who makes $50,000 a year and has a family member who has no job and a neighbor who has no job cannot understand why a person in Washington with a PhD in economics from Harvard would say that the economy has improved.
People who live outside of Washington or on streets other than Wall St. realize that the great stimulus investment made in the US and many of the other large economies around the world is a crutch that has allowed the bank system to recover and big companies to get back into the market to raise money. The US government has “bought” some jobs, perhaps several hundred thousand or a million through its stimulus programs. It is not the number of over three million that the President hoped for, but there is another jobs bill which will probably be approved by Congress this month. This new one will provide tax breaks for companies that hire people, highway construction funds, and access to capital for small businesses.
What the Congress cannot legislate is a return of any confidence among consumers and small businesses. Too few people are willing to say to themselves or the people they know that they are optimistic about their economic futures. Some businesses will take the tax breaks. Some new highways will be built. But, a year from now many of the people who are hired today will be out of work again. The government will have given its tax break for a year. The second year will be the problem, if businesses believe that there is not enough economic activity to maintain payrolls without government help.
Many of the people in the workforce today do not remember 1983. Those who do are well over forty. And, the mind has a way or erasing bad memories so the last really deep recession is an old wound for those who were wounded by it at all. This new recession began in 2007 and continued until late last year, although for many it is still a recession. This one will be remembered for decades, not just because of its depth but also because it never seemed to end.
Douglas A. McIntyre
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