Most Americans continue to see the U.S. economy as getting worse, not better
GALLUP NEWS SERVICE
PRINCETON, NJ -- Earlier this week, the U.S. equity markets hit new record highs. Many on Wall Street seem to believe in the so-called "Goldilocks redux" -- the economy is just right and the Fed will do whatever is necessary to keep it that way. In sharp contrast, consumers on Main Street continue to tell Gallup that economic conditions from where they sit are far from "just right." That is, the large majority of consumers are convinced that current economic conditions in the United States are actually getting worse, not better.
Part of this divergence in economic views between Wall Street and Main Street may be a direct result of globalization. However, some part is also derived from the degree to which consumers' views of the U.S. economy differ by consumer income levels.
Assessing Current Economic Conditions
More than one in three consumers rate current economic conditions in the United States as "excellent" or "good," while nearly one in four rate them as "poor" in latest Gallup Poll. This is little changed from similar ratings over the past couple of months but far below those of January 2007 when more than half of consumers rated economic conditions as excellent or good and 15% rated the current economy poor.
How consumers rate the current economy, however, differs significantly by income. Forty-two percent of those consumers with annual incomes of $75,000 or more rate current economic conditions excellent or good compared to only 18% of those making less than $30,000 a year. Thirty-seven percent of those consumers earning $30,000 but less than $75,000 a year rate the current economy as excellent or good.
Similarly, the 13% of those making $75,000 or more who rate the current economy as poor contrasts sharply with the 37% of those making less than $30,000 a year who provide this rating. Twenty-one percent of those consumers earning $30,000 but less than $75,000 a year rate the current economy as being poor.
Future Economic Expectations
More than two in three consumers say current economic conditions in the United States are "getting worse," compared to only 23% who believe things are "getting better." As bad as these consumer expectations are for the future of the U.S. economy, they are slightly better than the ratings of the past couple of months when more than 70% of consumers said the economy was getting worse and only 20% said it was getting better.
While consumer ratings of the current economic conditions differ significantly by income, their expectations for the future direction do not. About two in three of consumers with annual incomes of $75,000 or more (63%) and essentially the same percentage (64%) of those earning $30,000 but less than $75,000 a year say current economic conditions in the United States are getting worse. This compares with 71% of those consumers making less than $30,000 a year who feel the U.S. economy is getting worse.
Similarly, only about one in four of those making $75,000 or more and those consumers earning $30,000 but less than $75,000 a year say current economic conditions are getting better, while just 19% of those making less than $30,000 a year believe this is the case.
Reconciling the Differences
Many observers, particularly those actively involved in the political process, seem to find it hard to reconcile the euphoria on Wall Street with the malaise on Main Street. Although, the distress in the financial markets prior to the Fed's recent easing of interest rates seemed to be leading to an unfortunate form of reconciliation. What Gallup's consumer confidence measures by income data show is that many lower- and middle-income families simply do not perceive the economy as doing well as they are experiencing it.
While public opinion polls give consumers of all income levels equal weight and thus fully reflect their economic perceptions, the economy itself is disproportionately affected by upper-income and wealthy consumers who have much greater discretionary spending power than consumers with lesser incomes. As a result, these upper-income consumers can drive consumer spending and the economy higher even as many Americans are experiencing difficult times. In this regard, it is somewhat remarkable to think that more than one in three Americans (37%) making less than $30,000 a year describe current U.S. economic conditions as poor.
Still, probably the more important finding of the most recent Gallup Poll has to do with the way that just about two in three of all consumers making more than $30,000 a year now feel that the U.S. economy is getting worse, not better. To some degree, this may be a result of the growing depression in residential real estate and the recession in many related areas. Regardless, if consumer perceptions of the U.S. economy begin to reconcile in a negative fashion across all consumer income groups, and consumer spending slows significantly, then it is hard to see how Wall Street can long avoid the fallout.
Results are based on telephone interviews with 1,010 national adults, aged 18 and older, conducted Oct. 4-7, 2007. For results based on the total sample of national adults, one can say with 95% confidence that the margin of sampling error is ±3 percentage points.