Concerns About The Economy Broaden

Concern about the economy has begun to rise after a drop in mid and late 2010. There are a number of reasons for this, but these worries will persist until unemployment and GDP have sustained and long-term improvements.

A new Gallup poll shows that “Seventy-two percent of Americans cite some aspect of the U.S. economy as the `most important problem’ facing the country today.” The number is not as high as it was during the depths of the recession, but it is high enough to raise the issue again about whether many Americans believe the recession is over.

The new data show that fuel prices are a major concern. That has not been the case for more than two years. Worries about the general economy and unemployment still outdistanced any other items on the list. It is likely that the cost of energy will move higher in new polls. Almost no one thinks prices will fall and many believe $4 gas and $120 oil are inevitable.

Some economists are puzzled about why consumer spending has not moved up sharply as money from tax cuts makes it into people’s bank accounts. The improved news about unemployment should also make people optimistic about their financial futures. But, people are not rushing to buy things.

Apparently, a great deal of the money consumers have unexpectedly received from the current tax structure has gone into savings accounts and payment of credit card balances. Holiday spending was strong which means that many people spent more than they could afford. The mood in the country has gone from mild euphoria in the fourth quarter of last year to a deepening concern about the economic future.

The pessimism is likely to worsen, and it is not just because of higher fuel prices. Government layoffs have begun to rise and spread from state to state and town to town. People will again see neighbors and friends lose jobs particularly because government employment is such a large part of the jobs base in many areas. Those who are worried read that policemen and firemen are the targets of layoffs. What does it mean for people who do not have essential service jobs when those who work in the most essential jobs are unemployed?

The mood of consumers switched rapidly and it could move back to positive point again. That becomes less likely as each teacher is fired and each gallon of gas goes up another nickel.

Methodology: Results for this Gallup poll are based on telephone interviews conducted March 3-6, 2011, with a random sample of 1,021 adults, aged 18 and older, living in the continental U.S., selected using random-digit-dial sampling.

Douglas A. McIntyre