September Update Shows Public's Economic Outlook Remains Gloomy

by Jeffrey M. Jones

Seven in 10 believe economy is "getting worse"

GALLUP NEWS SERVICE

PRINCETON, NJ -- The Federal Reserve Board responded to growing concerns about the economy by lowering interest rates last week. The latest Gallup Poll makes clear that concerns about the economy extend well beyond the few who set monetary policy in the United States. Sixty-four percent of Americans have what can be considered a negative outlook on the economy -- they say current conditions are "only fair" or "poor" and are not improving -- one of the highest levels Gallup has measured since 1992. Evaluations of the job market are also beginning to show some signs of decline, and the economy is catching up with the war in Iraq in terms of Americans' perceptions of the most important problem facing the country.

The Economy

Each month, Gallup asks Americans for both their assessment of current economic conditions and their views of the direction in which the economy is headed with the following questions:

How would you rate economic conditions in this country today -- as excellent, good, only fair, or poor?

Right now, do you think that economic conditions in the country as a whole are getting better or getting worse?

Gallup combines these two ratings into a summary "economic outlook" measure, consisting of three categories:

Positive outlook: Rate current economic conditions as either "excellent" or "good" and say the economy is "getting better" or "staying the same."

Negative outlook: Rate current economic conditions as "only fair" or "poor" and say the economy is "getting worse" or "staying the same."

Mixed opinions: Rate current conditions as "only fair" or "poor" but say they are "getting better," or rate current conditions as "excellent" or "good" but say conditions are "getting worse."

In the latest poll, conducted Sept. 14-16, 2007 (prior to the Fed's interest rate cut), just 19% of Americans have a positive economic outlook, 16% have mixed opinions on the economy, and 64% have a negative outlook.

Gallup has not observed a more negative economic outlook on this combined measure since September 1992, when 66% rated the economy negatively. Since then, there have been several readings in the 60s -- including last May when gas prices spiked, in February of 2003 during the run-up to the war in Iraq, and in the fall of 2005 following Hurricane Katrina -- but none higher than the current 64%.

This highly negative economic evaluation is mostly driven by the widespread belief that the economy is headed in the wrong direction. Seventy-one percent of Americans now believe the economy is getting worse and only 20% say it is getting better. It is unclear what impact the Fed's interest rate cut might have on these numbers going forward, but this is the second month in a row Americans have been very downbeat about the economy's momentum. Last month, 72% said the economy was getting worse; this is the highest Gallup has measured since it first began asking this question in 1991.

Americans' assessments of current economic conditions are not very positive, either. Thirty-one percent of Americans rate current economic conditions as either excellent or good, while 23% say they are poor. Forty-six percent describe them as only fair.

Those numbers are little changed from last month (33% excellent or good and 20% poor), but much worse than what Gallup measured at the beginning of the year -- when 52% of Americans rated economic conditions as excellent or good.

In fact, the 31% currently rating the economy in positive terms is the lowest since May of 2006 -- when 29% rated it as such when gas prices sharply rose.

At times, Americans have been much more negative about current economic conditions than they are now. For example, just 18% rated the economy in positive terms in February of 2003 during the run-up to the war in Iraq. Even further back, less than one in five Americans rated economic conditions positively during 1992 and much of 1993, including a low of 10% in early September of 1992.

The Job Market

Gallup's monthly economic sequence also asks Americans for their evaluations of the job market. Thirty-nine percent say it is now a good time to find a quality job, which is the first reading below 40% in nearly two years (since December of 2005). Positive assessments of the job market were as high as 48% in January of this year and were 47% as recently as May.

Evaluations of the job market have been much worse in the past. Since Gallup first began tracking this question in 2001, the low point was a 16% reading in March of 2003.

The Economy as the Nation's Top Problem

Even with economic concerns running high, the war in Iraq continues to overshadow the economy in Americans' perceptions of the most important problem facing the country. However, the gap between the percentage who mention these two issues is narrowing. In the current poll, 30% of Americans mention the war in Iraq when asked to name the most important problem facing the country, while 25% mention some aspect of the economy -- including general mentions of the economy, unemployment, inflation, and gas prices among others. That five-point difference is the lowest Gallup has found since September of 2006, when the two were mentioned about equally.

Since last October, the gap in mentions of Iraq versus the economy has averaged 12 percentage points.

Survey Methods

These results are based on telephone interviews with a randomly selected national sample of 1,010 adults, aged 18 and older, conducted Sept. 14-16, 2007. For results based on this sample, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ¬Ī3 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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