Consumers Vs. Economists: How Perception Differs

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Robert Siegel talks with Gallup's chief economist Dennis Jacobe about Americans' perception of the economy — and how it differs from that of economists.

ROBERT SIEGEL, host: A few days ago, economist Mark Zandi of Moody's Analytics, a man who is very frequently quoted about the state of the economy, said something troubling and intriguing about the prospect of a double-dip recession. Zandi said: It could be the only recession that we actually will ourselves into.

Zandi was referring to dismal expectations that make people so nervous that economically speaking, they freeze. His remarks are a reminder that while we routinely report economic data - unemployment, cost of living, home prices, trade deficits - there are other measures of our economy that are by definition subjective. How secure do we feel? Are we confident enough about the future that we're willing to spend money or take risks?

But what Americans feel about the economy is something that the Gallup Organization has been polling people about for years. And Gallup's chief economist, Dennis Jacobe, now joins us from Chicago to talk about that. Welcome to the program.

Dr. DENNIS JACOBE: Thank you. Glad to be here.

SIEGEL: And how confident are we as a people?

JACOBE: We're a lot less confident than we normally are. Three out of four right now will say the economy is getting worse. And that's a number that approximates the numbers of late 2008.

SIEGEL: Now, during this time, that is to say the past several months, there have been some very, very weak figures on the growth of the economy. But there've also been, you know, an occasionally encouraging jobs report or things not so bad as people expected. Are those supposedly objective numbers that we see about how the economy is doing? Are people in line with those numbers or are they reacting to different things altogether?

JACOBE: I think the American people don't see the economy that most of us economists and the public policymakers see. Americans see high unemployment rates and are concerned about losing their job. They're concerned about higher food prices and higher energy prices, even though we say that there's not much inflation. They're worried about the housing market. And then on top of that, they're worried about things like politics and the confrontational kind of stalemate in D.C.

SIEGEL: Yeah. The period that saw this drop this summer, of course, coincided with the big Washington debate over raising the debt ceiling. Did that seem to make an impression on people?

JACOBE: That certainly had an impact according to our numbers. And what we see happening over the last several weeks is interesting in the sense that the average American, middle and lower income American, has been fairly pessimistic for quite a while with all these things that have been bothering them. But what we've seen happen recently is that things like the confrontation over the debt ceiling bill and on other kinds of things seem to have troubled upper-income Americans.

Now, they're also affected by what's happening on Wall Street and what's happening internationally with the problems in Europe and those kind of things, but when upper-income people also get very pessimistic, that's when our numbers get up to three-quarters or 80 percent of Americans being worried.

SIEGEL: If you were to try to look back in recent history for some time that's sort of like this or some time that might provide some reasonable comparison, is there one over the past decade, a few decades for that matter?

JACOBE: There really isn't. And, you know, I think that one of the things that's happening is that we're not paying enough attention to consumer psychology as opposed to Wall Street and investor psychology. People all the time talk about how that affects Wall Street and how when Europe has had financial problems, they thought - people thought back to 2008 and the financial crisis and all those kind of things.

But the average American is affected by the same kind of thing. They saw tremendous financial shock in 2008 and early 2009. And they saw that in their lives and in terms of not only credit access, but also in terms of their jobs and their job security. And I think people forget that when a lot of these things happen, like the budget confrontation, that that brings back memories of those days and those troubles. And that has a major impact on consumer psychology.

So the statement like Zandi made makes a lot of sense in the sense that consumers actually are impacted today differently than, say, in years past.

SIEGEL: Well, Dennis Jacobe, thank you very much for talking with us today.

JACOBE: Anytime. Thank you.

SIEGEL: That's Dennis Jacobe who is the chief economist for the Gallup Organization. He spoke to us from Chicago.

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