Still Not Surprising

Once again, economists were "surprised" by today's "unexpectedly" large downward revision to third quarter gross domestic product.

Even though they keep insisting that signs of recovery are widespread, the truth is that the only thing that gave the economy a lift last quarter was the government boondoggle known as "Cash-for-Clunkers."

As the Atlantic Business Channel notes in "GDP Revised Downward, Again," since CfC "probably moved auto purchases forward, rather than generating actual new demand for autos, this considerably dampens hopes for a 'V' shaped recovery."

Still, even taking into account all the taxpayer funds being thrown at the economy, some might wonder why certain statistics paint a less disturbing portrait of economic conditions than anecdotal and other evidence suggest.

A comment by "DirtyJobsGuy" posted to the aforementioned ABC commentary offers one explanation:

From both my industrial and family contacts, 2009 was somewhat OK due to work on backlog projects. But everyone said without new projects (my informal focus group includes everything from hotel renovations, gas stations, power plants, autos and hospitals) showing up as orders soon 2010 would be bleak.

Regardless, yet another survey of Americans -- most of whom aren't being bailed out or pumped flush with vitually free money -- reveals that they sees an altogether different kind of economic environment out there than your average stock trader:

"Despite Forecasts, Most Americans Believe US Economy Is Still in Recession and Fear the Worst Is Yet to Come"

- 53% say the economy is in trouble, while 45% expect it to get worse, according to new StrategyOne survey -

Despite some signs and predictions that the U.S. economy is rebounding, most Americans' opinion of the economy has remained steady since the summer, with 53% saying they believe the economy is in trouble, and 45% feeling the economy has not yet bottomed out and will still get worse (vs. 49% in July). The survey conducted by StrategyOne also indicates that the recession is taking an emotional toll, with two-thirds of Americans saying the recession has significantly changed their general outlook on life.

When asked to describe the current state of the US economy, 41% say it is in a deep recession and another 12% believe the economy is in a 1930's-style economic depression. Just over one-third (34%) say the economy is in a mild recession, while only 5% of Americans say the economy is doing fine.

"Despite some indications suggesting the economy is strengthening, Americans are as concerned as they were in July that the current slowdown will become a protracted problem that doesn't have an immediate end in sight," said Bradley Honan, Senior Vice President of StrategyOne. "With consumer spending accounting for two thirds of the economic activity in the country, these feelings could turn into a self-fulfilling prophecy."

Less than one-third (30%) today say the economy has bottomed out and is getting better, with 28% feeling that way in July 2009. Lastly, while 18% today believe the economy is at the bottom and is getting neither better nor worse, 21% felt that way in July.

To the extent some believe the economy is recovering, it is a feeling that is particularly pronounced among high income earners and households.

Only 25% of those living in households making less than $50,000 annually believe the economy has hit bottom and is getting better. By contrast, 36% of those in households making $100,000 or more report the economy has hit bottom and is now getting better.

Regardless of current sentiment about where the economy stands today, it is clear that the downturn has altered our national outlook and psyche. Thirty percent report that the current recession has changed their general outlook on life very significantly and another 38% say it has done so somewhat significantly. By contrast, just 29% report that the economic recession has either not very significantly or not significantly at all changed their general outlook on life.

"There clearly will be psychological implications from the economic downturn in terms of how consumers behave," said Honan. "How quickly businesses adapt to these new realities will go a long way towards determining how fast we recover economically from this most recent recession."

Comments

[Hiro]

Hope all is well Michael.

Regarding - 'By contrast, 36% of those in households making $100,000 or more report the economy has hit bottom and is now getting better.'

How would interpret the difference in sentiment between the lower and higher income households? Could it be that the higher income households typically have more investments versus the lower income households and is related to the stock market surge?

[Mark G.]

But everyone said without new projects (my informal focus group includes everything from hotel renovations, gas stations, power plants, autos and hospitals) showing up as orders soon 2010 would be bleak.
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EVERY small business owner I talk to, from graphic designers, print shops, light structural steel fabricators and design engineers echo the above statement but with a bleaker outlook. The small businesses are still getting crushed. If you aren't suckling directly from the govt. teet, the future isn't bright.

[robert]

Hiro that is exactly what I thought (higher incomes have more exposure to equities, gold etc) when I read that stat. The other consideration I have is the interpretation of these polls as leading or lagging indicators. I think everyone on Wall Street believes they are lagging and this might go some way to explaining the incessant and now pretty much nonsensical rise in the markets given the negative real world backdrop. Like ringing a bell for Pavlov's dog, every time one of these polls is released the market moves higher in anticipation of the big contrarian pay off which, so far, has come only to those who have already sold (eg. clever insiders). The smugly complacent herd don't know it yet but they are simply the bag holders of the very near future.

[buzzsaw99]

I'm sure Marie Antoinette thought the economy was pretty sweet too.

[roger]

Mass opinion is based mostly on,feelings,beliefs,fear
and desires and the results are often,mass delusion or hysteria.
A good illustration was Germany 1930's .
Bush did not get elected by an intellectual citizenry either.

[Matt]

Ok not to give anything away from Dan Brown's new book, but what if we do a group think positively. (sarcasm) The debt does not matter anymore, we cannot pay it back ever this is obvious to the government.

[MrJumboMortgage]

And we have 37 MILLION americans living on food stamps. MSNBC article here http://www.msnbc.msn.com/id/34479788/ns/business-personal_finance/

Why not create and entity that lends to small business to create jobs? Oh wait.. its called the SBA. Maybe we have Timmy print $100b and give it to SBA?

I say people in the streets within 6 months unless they get people working. Hey it worked in the great work programs of the depression era.