SUSAN STAMBERG, host:
This is WEEKEND EDITION from NPR News. I'm Susan Stamberg.
The latest surveys show that both business owners and consumers have been losing confidence in the economy. When people feel uncertain about the future, they just don't want to spend money. And that lack of spending is making everything worse.
We're going to zero in on this recent slump in confidence with NPR's senior business editor Marilyn Geewax. Hi.
MARILYN GEEWAX: Hi, Susan.
STAMBERG: What is behind this outbreak of pessimism?
GEEWAX: Well, as the year began, confidence in the U.S. economy was rising. A lot of people felt that the recovery was finally starting to take hold. But more recently, that confidence is starting to slip again. Even the Federal Reserve officials this past week, they said they were less confident about growth now. And the reasons for this backsliding are different for businesses and for consumers. So let's just start with businesses.
If you look at the record amounts of cash that corporations have on hand, you would think business owners and corporate managers would be feeling pretty fat and happy. They have more than $1.6 trillion in cash reserves. But they're reluctant to take any chances with that money, which means they're holding off on hiring workers; they're not developing new products, new services. They just feel a lot safer sitting on that cash because they see so much uncertainty out there.
STAMBERG: Well, whats making them so unsettled about that?
GEEWAX: For one thing, no one knows what is going to happen with this federal debt ceiling. For months now, Congress has been wrestling with ways to either cut federal spending, or raise the ceiling. But if lawmakers can't reach a deal, that could trigger fears of a default and that, in turn, could lead to a new financial crisis.
And even if all of these political problems were finally worked out somehow, business leaders would still be worried about real estate and manufacturing in this country.
STAMBERG: Well, let's start with real estate. The market, it's terrible. It's really terrible. Whats the latest?
GEEWAX: Well, just this past week, we got a fresh round of reports that showed that home sales were down, and prices are still continuing to drop.
STAMBERG: Yeah. And what about in manufacturing?
GEEWAX: This spring, the manufacturing sector started weakening again, too. And thats really disappointing because manufacturing had been such a bright spot when the year began. To get a reliable recovery going, the country needs to see consistent strength in manufacturing, and real estate has to really rebound. Until then, most business owners are just going to remain wary.
STAMBERG: OK, so that's the corporations. What about consumers?
GEEWAX: Consumers turned gloomy when gasoline prices spiked up earlier this spring. The prices are down, now, from May, but gasoline is still about a dollar a gallon more than it was last year at this time. And of course, food prices are higher, too.
But really, the biggest wet blanket is this lousy job market. The unemployment rate slipped down to 8.8 percent back in March. But then you remember, it bounced back up again. So it's up to 9.1 percent.
That's a problem even for people who do have jobs. A slack labor market means that workers aren't likely to get meaningful raises this year. Businesses are saying they're still getting six applicants for every job opening, so they don't feel any pressure to raise wages. And that kind of slow wage growth, it's just psychologically tough for consumers.
STAMBERG: So raises would change the mood of consumers?
GEEWAX: Yeah, I think the number one thing is for people to get some decent raises. And they also need to see their neighbors get jobs. They need to see home prices stabilize. But unfortunately, none of those things seems very likely in the near future.
STAMBERG: Please, just a little glimmer of possibility here.
(Soundbite of laughter)
GEEWAX: Well, we did get some glimmers. Lately, gas prices have been declining with oil prices going down - and thats good. And on Friday, we had a new report that showed businesses increased their orders for machinery, electronics, airplanes, and all that happened in May. And on Tuesday, we're going to get this latest Consumer Confidence Index report. That'll give us a little bit of a better idea whether those improvements in gas prices, and this little uptick in manufacturing, were enough to cheer us up.
STAMBERG: Sitting there with fingers crossed, NPR's senior business editor Marilyn Geewax.
Thank you very much.
GEEWAX: Oh, you're welcome.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.