Economic Confidence Slips As Problem Becomes Center Of Attention

Concerns about the economy ran well ahead of those about the environment and the clean up in the Gulf. That should not be a surprise because there is a great deal of evidence about the economy slowing, and people put their jobs ahead of an oil spill.

Gallup reports that when people were asked what the most important issues facing the nation were, 31% said the economy and 22% said jobs. This was followed by 11% who said their primary concern was dissatisfaction with government.

The Problems with the economy are actually growing more acute if another Gallup Poll is right.

“Gallup’s Economic Confidence Index is on its way in July to registering its largest one-month drop since October 2008 — when the country was reeling from the emergent Wall Street financial crisis.” The numbers confirm recent research from Bloomberg that showed 71% of those questioned still think the nation is in a recession.

The plunge in consumer confidence is greater than many government numbers show. That could be due to a conspiracy by the federal government to make the situation seem better than it is, but that is an unlikely answer to the huge reversal in sentiment. It is more likely that the economy moved to a halt in the second quarter, or economic activity may actually have dropped. GDP may be up modestly, but the figures that matter to the average citizen may not. There is a great deal of evidence that real wages have not increased in several quarters, if not several years. The access that consumers and very small businesses have to capital is so bad that Ben Bernanke said many small companies are closing despite their credit worthiness. Banks are simply to skittish to extent loans.

The other factors that could undermine consumer confidence even if the overall economy is improving is the drop in real estate prices and the broad-based fear that aggressive layoffs are not over. It appeared that mass firings largely stopped earlier this year, but several large companies like Merck (NYSE: MRK) have announced huge job cuts. The jobs-to-job seekers ratio is still a very high 4.7 to one. People simply see no sign of improvement in the economy from the bottom of the recession. What was a credit crisis for big banks and corporation may have largely passed. That is not so for the indicators that are important to people with no savings, high debt, and an inability to do more than live paycheck to paycheck.