Americans feel a pinch - but no panic
WASHINGTON — The stock market has tumbled. Layoffs are up. Most families in the United States have less monetary worth today than a year ago. Yet even with all this sobering news, Americans are upbeat.
A nationwide survey finds that many Americans expect continuing trouble ahead for the US economy. Even so, most predict that their own households will do well financially. The Christian Science Monitor/TIPP poll reports that:
* Nearly one-third of Americans (32 percent) predict that the US economy will be in even worse shape in six months than it is today. Far fewer (18 percent) see the economy improving.
* In contrast, most Americans expect their personal finances to improve or stay the same during the next six months. Only 12 percent say their finances will weaken.
One reason Americans apparently have doubts about the future of the US economy can be traced to Washington. Nearly one-third in this survey said they were not satisfied with federal actions meant to keep the economy going in the right direction. That lack of confidence was up 6 percent since the last survey in February and may reflect the failure by the Federal Reserve Board to reverse the stock market's sharp slide.
The Monitor/TIPP survey of 909 Americans was conducted by telephone March 8 to 12. It is the second in a monthly series conducted in conjunction with Investor's Business Daily.
The survey produces a monthly national "Economic Optimism Index," which gauges how Americans think the economy is doing and where they think it is heading. The index ranges from 0 to 100. Anything below 50 indicates a pessimistic response. Above 50 is optimistic. The readings in February and March were identical at 54, or slightly optimistic.
What's somewhat surprising about the latest results is that the drumbeat of negative economic news has not dampened Americans' sentiments. Not only did the stock market make new yearly lows during the past week, but the impact of the one-year decline in stocks is clearly being felt in millions of American homes.
When the Fed recently released its report on household net worth, it showed that for the first time since 1945, when record-keeping started, net worth declined on an annual basis.
After peaking in the first quarter of 2000 at $43.2 trillion, net worth dropped by the end of 2000 to $41.4 trillion, a dip of 4 percent. Since then, Salomon Smith Barney estimates that another $1 trillion has been lost as the stock market declined, for a total loss of 6 percent, or $2.8 trillion, in household worth since the peak.
Yet many Americans, particularly young people and Republicans, say their expectations for coming months are good.
Ted McReynolds, a chiropractor in Chillicothe, Ohio, was one of those surveyed. "I believe that the economy will be better," he says. "Things will calm down. This kind of [downturn] usually happens when we have a new president in office."
Mr. McReynolds says pending changes could give the economy a boost, including the proposed across-the-board tax cut, more reasonable energy policies, and a possible capital-gains tax cut.
Ruth Jarvis, a retiree in Henniker, N.H., wasn't surprised when the economy stumbled. "It went too far too quickly," she says. "You can't always grow that fast. It was just too fast."
Ms. Jarvis suggests that President Bush's ties to big business will be a plus. "I think Bush and big business will stick together and make sure things get better."
The survey found that among various age groups, the youngest (18 to 24) is the most confident. Some 56 percent said they expected to be better off financially six months from now. Only 11 percent thought their situation would worsen.
Among Republicans, 42 percent said they'd be better off, while just 8 percent expected their own situation to decline.
At the other extreme, only 11 percent of those over the age of 65 thought their economic picture would improve in the next six months, while 17 percent felt things would be worse.
In Youngstown, Ohio, William Smith, who receives disability payments, is one of those who is worried. "I've been seeing a lot of plants closing down and a lot more people are out of work."
Mr. Smith disagrees with the Bush tax cut. "It's not the right time," he says. "The country just got out of the red.... I don't think the tax cut will do much for people at the bottom anyway."
Perhaps because of recent stock-market declines, only 33 percent of those who have invested at least $10,000 in stocks felt they would be better off in the next six months. In contrast, 38 percent of those without money in the market thought their finances would improve.
Staff writer Steven Savides contributed to this report.
(c) Copyright 2001. The Christian Science Monitor