To tweak an old saying about the month of March, 'February came in like a lamb and is going out like a Lion'. At the beginning of the month, the economic news seemed somewhat encouraging: a solid 4th quarter GDP growth result and a January reduction in unemployment. I was somewhat cynical about the validity of both pieces of news (as a harbinger of sustained improvement) and my earlier comments on both subjects illustrates not only my cynicism but my outward cautions about what that news meant for the struggling recovery process. Alas, as much as I don't like to be prophetic when it comes to bad news, today I can claim a bit of Nostradamus-like talent as the news at the end of the month is a bit more in-line with where I thought the economy was "really at". The polls this week also tell me that average Americans are more like me; doubting Thomases about Washington's ability to turn the economy around.
1. The Polls: Rassmussen, via its daily tracking poll, indicates that most Americans (56%) oppose the President's health care reform proposal and 51% fear Washington more than they fear private insurers when it comes to health care. Of course, today is the start of the President's big bi-partisan summit on health care reform. For President Obama personally, the poll results are equally as disconcerting with 40% stating that they strongly disapprove of the job that he is doing. For Congress, the news is actually worse with 71% of polled voters stating that the legislature is doing a poor job - the highest level of disapproval ever recorded by Rassmussen. Almost half (48%) of Democrats say that Congress is doing a poor job and 70% of all voters polled said that Congress has doing nothing legislatively to improve the lives of Americans.
2. The Jobs: Jobless claims soared toward the end of the month, jumping back up to a seasonally adjusted 496,000. Many economists had predicted a slight decrease in new unemployment claims for the month. The four-week moving average (smooths volatility) was up 6,000 to a seasonally adjusted 473,750 with continuing claims (workers out of work longer than a week) rising by 6,000 to 4.6 million. Factoring in January's modest dip in unemployment which really was caused by nothing more than a series of technical corrections made by the Department of Labor, I predict (as I have earlier) that unemployment will actually rise back to the 10% level for February. Most troubling to me is the persistency of the picture of total jobless Americans overall - now approaching 20% of all Americans. This number reflects the unemployed, those that quit looking for work and the under-employed (those in part-time or seasonal work that would prefer to be in full-time employment). Earlier this week, the Senate passed a new "jobs stimulus" bill that is less pork-ridden and more focused on tax cuts as the stimulus. I think this is at least a start but again, I hope Washington will realize that it needs to stop wasting time on health care reform that is unpopular, deficit creating, and job killing and focus on true economic stimulus activity such as re-authorizing the Bush tax cuts, reforming the income tax code and reducing the regulatory bureaucracy and burden facing most, if not all, small businesses.
3. The Consumers: Perhaps the worse news out this week came from the Conference Board regarding consumer confidence. Consumers and consumption are ultimately the biggest engine in the American economy and today, they represent an engine that is literally out of gas. The Consumer Confidence Index (data released today) fell by 10 points to 46 (100 as correlated to 1985 is normal), the lowest level since April of last year. The Present Situation Index which measures consumer's beliefs about current economic conditions also fell to 19; a 27 year low. These numbers are not a good sign for the upcoming home buying season and for retailers in general. Without question, continued uneasiness about the employment sector is fueling a large amount of consumer fear and thus, confidence retraction.
My thoughts are that the above news is discouraging and I had hoped for better but at the same time, I’m not surprised. I heavily discount point-in time reports out of Washington regarding unemployment and GDP growth today as I prefer to look inside the numbers to see what really is going on and where the trends may or may not be. To date, I have not to see much in these reports that signals a persistent, even if modest, trend toward recovery. What I do see is a lot of "fits and starts" and some glimmers or flashes of rebound but little frankly, of any true signs of life.
At the same time, as I am heavily "public policy" focused, I see the poll results for what they are and can honestly state that in terms of the results, I am surprised only that they are not worse. In my opinion, Washington as a whole has totally mismanaged this period of economic crisis and has spent as much time adding 'gasoline to the fire' via massive deficit spending, ill-conceived and economically disastrous policy proposals on health care reform and energy, and last but not least, ineffective management of the government's budget and spending priorities. From my vantage point, I have not seen such economic bungling in Washington since the Carter years and apparently, most Americans feel the same as demonstrated via the polls and the Conference Board report. I can only hope that the winds of wide-spread change via fall elections will somehow motivate the Congress and the President to get focused on developing a true economic recovery game plan.