No matter what Ben Bernanke says about a slow economic recovery or what improved GDP growth and lower unemployment signal, many Americans still believe the economy is in horrible shape. “More than half of Americans (55%) describe the U.S. economy as being in a recession or depression,” a new Gallup poll shows. The number who think the current situation is a depression is an astonishing 29%.
The poll gives some of the reasons for the pessimism one of which is inflation. Some of this is probably driven by gas prices, but the rise in retail prices has also been noted by firms as diverse as Wal-Mart (NYSE: WMT) and Procter & Gamble (NYSE: PG) as a growing problem. They believe price pressure will not only hurt their margins but will force them to risk raising retail prices at a time when consumer confidence remains shaky.
Lack of confidence in the economy is a self-fulfilling prophecy. People do not buy goods and services out of concern about the future. This drags down retail sales and damages retail firm profits. Companies in the sector cut costs to maintain margins, which means that they may also cut jobs. The ripple moves to other industries including airlines, consumer products companies, consumer electronics, home improvement and the automakers.
The Gallup data shows that Washington has not been able to convince many people that the recession of 2008 and 2009 is over. Americans with good paying jobs and money in the stock market may have felt a sharp improvement in their fortunes. Americans who have concerns about their jobs or have had no wage increases in years remain pessimistic. And, the roughly 17% of citizens who are under-employed or unemployed probably make up a large portion of the people who believe that the economy is in a depression.
The debate about America’s financial future mostly focuses on the growing national debt and $1 trillion deficits. That has turned the attention of Congress and the Administration away from problems that are critical to morale and an economic recovery. At the top of the list are home prices and long-term joblessness. Each has been intractable as far as the government is concerned because neither has been solved by policy efforts over the last three years.
It is hard to make a case that the economy can recover to any significant extent when so many people believe that it has not recovered at all.
Methodology: Results for this USA Today/Gallup poll are based on telephone interviews conducted April 20-23, 2011, with a random sample of 1,013 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia.
Douglas A. McIntyre