The Public Says, `Show Me a Recovery'
IN a much-ballyhooed report, the federal government announced last week that its main economic forecasting gauge had improved dramatically in December. Recovery, it would seem, is upon us.
Don't tell the folks at home.
Yes, many economic indicators have gained. Even consumer confidence, that stubborn drag on the economy, soared after the election. But the federal data are for December. In January, confidence fell substantially.
That reversal could chill the recovery. Consumer spending accounts for two-thirds of economic activity in this country; the economy will have enormous difficulty sustaining a recovery that is not supported by consumer confidence. And confidence today is far below the levels associated with a growing economy.
The reasons seem clear: Economic conditions have not improved fast enough to satisfy expectations. While their hopes are up, Americans overwhelmingly believe the recession is not over; they're waiting for tangible evidence of recovery, and they have yet to see it.
Take the labor market. Unemployment remains above 7 percent. Corporate giants such as IBM, Sears, and Boeing have announced substantial job cuts. No wonder more than 6 in 10 Americans give a negative rating to the job picture in their own communities.
Employment is only part of the story. Personal income rose just 3.5 percent in 1991 and 4.7 percent last year. That's well under the 1990s rate of 6.5 percent, much less the 7-to-10 percent level of the 1980s. Americans are feeling pinched; a majority have rated their own finances negatively for 73 of the last 80 weeks. That never happened once in four and a half years of weekly polls before the recession began.
Given continuing financial difficulties coupled with nagging job worries, the public mood should come as no surprise. In the latest weekly consumer survey by ABC News and Money magazine, 73 percent of Americans called it a bad time to spend money. And 87 percent gave a negative rating to the condition of the national economy. Last week's positive economic news had utterly no effect on consumer confidence.
Those findings hardly signal recovery, and they deserve to be taken seriously.
Remember July 1991, when the Bush administration announced that the recession was over, based on improving gross national product? Americans almost unanimously disagreed with that assessment. The recovery was stillborn, and 16 months later George Bush paid the price. The simple lesson is that Americans use "recession" in a vernacular sense - meaning, "How am I doing?" - rather than its technical meaning. Their answer is "Not too well."
All is not gloom. Confidence in current economic conditions still is higher now than it was just before the November election. And expectations - the most forward-looking measure of consumer views - are still fairly positive. Last fall, 52 percent of Americans thought the economy was getting worse. Today that's down to 26 percent - just half as many.
That means many Americans are primed for recovery. The problem is that they have yet to see it. And the longer people have to wait, the less they are confident that it is really coming.