Americans See Economy in Tenuous Balance

by Raksha Arora, Business and Economy Editor

Lackluster outlook on jobs, markets

Last week's Consumer Price Index report only confirmed the inflationary pressures that economists have long been predicting -- and so the Federal Reserve must now stay the course with regard to its restrictive monetary policy. The markets were not pleased with the news, given the toll further tightening will take on economic growth. On the same day the inflation number was released, Reuters reported that U.S. Treasury Secretary John Snow brushed aside worries about stagflation. "Although we've seen some softer numbers in some areas, the overall picture remains very, very good," Snow said.

Are the American people as optimistic as Snow? The latest Gallup Polls on economic issues* find evidence of weakness in the public's current outlook on jobs, equity investing, and property markets.

Job Seekers Hang in There

The long months of the jobless recovery hurt Americans' assessments of the job market considerably; assessments hit a low point in March 2003, when only 16% said that it was "a good time to find a quality job." The good news is that those perceptions have rebounded somewhat; as of this month, 38% of Americans tell Gallup that they think now is a good time to find a quality job. The bad news is that the rebound took place predominantly between September 2003 and November 2004; over the last five months or so the trend has been relatively flat.

The 'Bear' Majority

Nearly two in every three Americans (62%) say that they personally (or jointly with a spouse) have money invested in the stock market right now -- either in an individual stock, a stock mutual fund, or in a self-directed 401(k) or IRA. Almost without exception, that percentage has remained at this general level since 1998. With such widespread participation in the stock market, the market's performance has become an important barometer of sentiment about the economy.

So do the American people believe that now is a good time to invest in stocks? Public opinion on this subject is divided, with a bare majority (51%) thinking it is a bad idea and 45% thinking it is a good idea. Enthusiasm for the stock market has dropped off slightly since January 2004.

Bloom Still on the Property Market

In April 2003, 81% of Americans said it was a good time to buy a house. While low interest rates have fueled a home-buying frenzy that some have characterized as another asset bubble in the making, for the majority of Americans the bloom is still on the rose, with 71% still saying property markets are a good bet. While this home-buying optimism shows a decline from two years ago, Gallup has found a majority of Americans endorsing a home purchase even in difficult economic times such as 1978 and 1991. 

Bottom Line

Americans have maintained their optimism (or pessimism) about job prospects -- but for nearly six months now, these numbers have shown no significant upward momentum. When it comes to the equity markets, there is no decisive view as to where valuations are headed and interest in home buying is moderating as well. Altogether, these important public opinion indicators paint the picture of an economy in a fine balance, and an American consumer waiting to see which way it will tip.

*Results in the current survey are based on telephone interviews with 1,003 national adults, aged 18 and older, conducted April 18-21, 2005. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.

Results are based on telephone interviews with 1,010 national adults, aged 18 and older, conducted April 4-7, 2005. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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