Is it over?
According to the Conference Board's Consumer Confidence Index, released Tuesday, Dec. 28, Americans' faith in the economy declined in the nearly three-week period ending Dec. 20, suggesting that the nation's economic problems continue as the doldrums that started with the financial crisis in late 2008 enter their third year. That might seem to contradict a Monday, Dec. 27, report that retailers experienced an uptick in holiday spending. And last week, President Obama declared that the economy is "past the crisis point."
So it's worth asking: Is the economy actually improving?
Generally, the economy is better off than it was in early 2009, near the height of the recession, when Barack Obama opened his presidency with a sweeping economic stimulus and the U.S. auto-industry bailout. But despite declarations that the recession is over, the crisis persists: the U.S. unemployment rate in November was 9.8%, a slight increase from a month earlier but still better than the 10% rate in November 2009. And America is still saddled with debt. The Conference Board's index is based on a survey of about 5,000 households, averaging responses to questions about current and future economic conditions. The share of people who believe current business conditions are "bad" fell to 41.2%, from 42.9% in November. The share of people who said they believe conditions are "good" declined to 7.5%, from 8.5% in the same period. The overall index is 52.5, down from 54.3.
During a period of robust economic growth, the index is above 90. "The big takeaway is, there's been relatively no change over the past year," says Lynn Franco, director of the Consumer Research Center at the Conference Board, a nonpartisan outfit. "From the pessimistic view, 'no change' is never good, but from the optimistic side, the fact that we're still holding our own is good. And we know the recession has been declared over, but there's still aspects of the economy that make consumers feel like we're not entirely out of trouble."
In another key index, the Reuters/University of Michigan Survey of Consumers, respondents expressed confidence that the unemployment rate would actually decline in the coming months, leading researchers to predict that people would spend more. But the Michigan researchers offered one notably contradictory caveat: "Consumers' views of their financial situations have remained quite negative due to the widespread expectation of stagnant incomes."
In recent weeks, the Obama Administration has launched several initiatives to stimulate the economy, and earlier this month it met with a handful of CEOs to outline plans. At a Dec. 22 press conference, Obama declared the economic crisis over, saying, "We now have to pivot and focus on jobs and growth. And my singular focus over the next two years is not rescuing the economy from potential disaster but rather jump-starting the economy so that we actually start making a dent in the unemployment rate and we are equipping ourselves so that we can compete in the 21st century."
Obama's goals could get a boost from whoever he names to replace Larry Summers as head of the National Economic Council. Robert Johnson, director of economic analysis at the research firm Morningstar, says the tax deal crafted by Obama and congressional Republicans will help especially the provision giving a 2% payroll-tax cut to all workers. "That's a huge chunk of change, and I'm glad to have it," says Johnson, who calls the tax deal a "second stimulus." He adds, "I'll probably spend it."
Johnson predicts that U.S. companies, which have lowered their payrolls by 7.5 million jobs in the past three years, could actually add 3 million employees next year. That could push the nation's unemployment rate below 9%, which would be a small relief for the Obama Administration and the voters on Main Street but a significant aid to those who find work.
More likely, economists say, is that the U.S. is settling into a period in which the economic indicators remain confusing. One short-term measurement is retail spending. Another is auto sales, which appear to be improving. A third indicator is housing sales, which remain in the doldrums.
So is it over? Not yet.