“Flashing a recession signal.”
Consumer optimism about the economy is waning, and small-business-owner sentiment is giving off recession vibes. That’s how different surveys are now mucking up the rosy scenario.
Gallup’s Economic Confidence Index, released today, added another dimension. It dropped four points in the week ending April 24, to -16, the lowest since August 2015, and down from positive territory in January 2015.
It left Gallup groping for answers:
Pessimism has increased despite a strong stock market in recent weeks and a persistent low unemployment rate. However, there have been reports of weak retail sales and expectations of low first quarter economic growth. Gas prices have also started to rise, although they remain well below where they were for most of the past decade.
The report also blamed the rhetoric emanating from the presidential primary. Candidates, still unconstraint by the dictum affecting US Presidents to always hype the economy, have unabashedly pointed at some ugly spots in the rosy scenario and have suggested “how they would fix the US economy if elected.” This, Gallup says, rattled some nerves.
In January 2015, the index was at +5. It wasn’t exactly wallowing in exuberance, given its theoretical range of +100 to -100 (it hit -65 during the Financial Crisis). But that was the high point. And it has been zigzagging south ever since.
Consumers don’t live in the Wall-Street economy. They struggle with their daily challenges in the real economy. For them, it’s tough out there. Study after study confirms that about half of them, even those considered middle class, are living from paycheck to paycheck and can’t come up with $500 for emergency purchases.
But the most troubling aspects in the Gallup data simmer beneath the overall index, which is a composite of how Americans see current and future economic conditions.
The current economic conditions index has been trending down gradually. Today’s reading, at -7, is the lowest since November last year, with 23% of Americans saying the current economy is “excellent” or “good,” while 30% said it’s “poor.”
What’s coming down the pike looks even worse, according to Americans in the real economy. The index for future economic conditions plunged 6 points to -25, from an already crummy -19 last week, the lowest since August last year – a time “when the stock market plummeted over concerns about the Chinese economy,” as Gallup reasoned. Only 35% of Americans said the economy is “getting better,” while 60% said it is “getting worse.”
Both measures were positive in January and February 2015!
Also today, the Conference Board released its Consumer Confidence Index for April which, to the great disappointment of economists, fell 1.9 points to 94.2. While the Present Situation Index rose 1.5 points to 116.4, the Expectations Index plunged 4.3 points to 79.3 — confirming the Gallup poll: they’re seeing trouble balling up in the future!
Small businesses have been feeling the blues in a big way for a while. The Small Business Optimism Index for March, released by the National Federation of Independent Business earlier this month, fell to 92.6. As the report put it, the index “has turned decidedly ‘south’ over the last 15 months,” from its recent peak of 100.3 in December 2014:
A “chartist” looking at the data historically might conclude that the Index has clearly hit a top and is flashing a recession signal.
These small business owners were “very pessimistic about the economy.” Only 8% thought now was the right time to expand, while 51% thought now was a bad time to expand, citing as the top two culprits “weak sales” and a “poor economy.”
There’s a strong correlation between small business sentiment and consumer sentiment. But small business owners see troubles much sooner than consumers, and hence their sentiment dives much sooner. This chart by Advisor Perspectives shows how the early dive of small-business sentiment (red line) opens up a gap to consumer sentiment (blue line) during the period shortly before recessions:
Small businesses fight it out on a daily basis in the trenches of this economy. They see the first little squiggles in their orders, sales, or customer traffic, or they’re suddenly not getting a contract they expected to get. They’re the first ones to express their doubts when things tighten up, ahead of consumers.
Consumer and small business sentiment peaked at about the same time, near the end of 2014. As the above chart shows, while consumer sentiment has waned since then, small business sentiment has plunged. And this opened up the gap between the two. Last time this happened, with small business sentiment plunging way ahead of consumer sentiment, was just before the Great Recession!
Already, brick-and-mortar retailers are slithering into an existential crisis. And there’s no respite in sight. Read… Retailer Bankruptcies Are Hailing Down on the US Economy
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In April 1976 a competitor in my Dad’s line of business called The Phone Company (only one then) and complained his phone was out of order. They said “Why do you think it is out of order?” He said “It stopped ringing.” They said, “It’s working”. I believe this story because I worked in the retail side during the summers of ’75 and ’76… In 1975 I was busy all day, in 1976 I just stood there. So great graph!!! Thanks Wolf.
I think I still have my “WIN” button from that time, stuffed in a box in the garage.
The looters in the Fourth Estate are always “surprised” when things don’t match up with the world they’ve created in their heads. Why, the stock market is near all time highs and unemployment is low! Why, Obamacare has solved the conundrum of health care for everyone but these knuckle draggers in flyover country refuse to see reason. Good grief they even expect to make a profit the greedy bastards! How can they be so selfish when the world is being destroyed by man made global warming, er, climate change! They need to feel the Berne or get Hillaried! Those bitter clingers are actually rejecting the status quo and backing those Nazis Trump and Cruz. How can we dip money from the money river if it dries up? Do you actually expect us to WORK when it’s so much easier to make stuff up? Our bottom line is being affected. No I’m not a greedy capitalist! I see no reason to insult me! How do you expect me to maintain my lifestyle so I can hobnob with the Clintons and wear pink ties??
There is a growing awareness that all is not alright as constantly proclaimed by politicians and the talking heads. They all ignore the fact that most good jobs lost since 2008 have been replaced with lousy jobs. Household debt is way up and wages are down. Real purchasing power is very much curtailed. The rank and file know this. What is so amazing is the arrogance of our political class to assume that simply talking up the economy will make all our troubles melt away. People recognize this arrogance and it is because of this disconnect that Trump will win the GOP nomination.
The so called Main Stream Media is in the tank for the new world order.
Low unemployment rate. Now thats hilarious.
ROL
the GreatER Depression, genesis 2008
I would expect troubles in Frackland to be enough to bring a confidence index back a few ticks. We probably won’t know whether the $400 per month pickup truck leases panned out until mid-summer. There are still wonderful opportunities in mobile phone ads (enormous Wall Street bets), car sales (where leases are advertised at $69 per month), anxiety medication (booming business), and apartment construction (hoping millennials flee basements). Auto repo lists in the newspaper are trending up but mildly. The commercial real estate banksters are making some interesting price increase lunges, even knocking out a favorite local restaurant.
Hospitals are doing great business with the help of ObamaCare and Medicaid. Lots of crummy jobs are going unfilled. Then again, this is a consumer-oriented service economy as the academics assure us. Today we get more soothing words from President Janet.
“Lots of crummy jobs are going unfilled.”
That’s because they’re crummy. Foraging for nuts and berries you can at least set your own hours.
WM
That’s sad & true but never the less, kinda funny.
Under Obama (and Bush for that matter), America has replaced millions of good-paying jobs with millions of low-wage part-time jobs.
Unemployment statistics look good only because millions are working more than one part-time job. And if those folks lose one of their 2 or 3 part-time jobs, they are not eligible to claim unemployment since they still have at least one part-time job.
The pundits wonder why the average American can’t come up with $500 for an emergency expense.
It’s easy to see why.
While the Fed and the politicians shower the already-wealthy with trillion$ of free money and tax cuts, ordinary Americans are left to twist in the economic wind.
And the pundits still can’t figure out the problem.
well…i grow my own berries…so it’s double-plus good! ;)
My own existential crises tend to be metaphorical.
I used to think of myself as a small prey animal, surviving so long as I could craftily avoid becoming an appetizer for a Wall St. predator. But now I realize I overestimated myself, and that I’m really little more than a stick of chewing gum, available in a vending machine for convenience. Mint or cinnamon-flavored, it seems my destiny is to end up getting scraped off a Goldman shoe.
Other times I feel like a bit of leftover bean on the plate of prosperity, but that is another story and shall be told another time.
So, pretty grim here. How about you?
I’m probably in clover. A neighbor is selling their house and the realtor insists it will be gone in two days. This must mean I have enough fresh home equity to acquire my own spanking new giant pickup truck although I will chicken out. In desirable neighborhoods buyers are forgoing inspections due to lack of supply. It would appear almost no one is moving! One of those employment mysteries I guess.
“In desirable neighborhoods buyers are forgoing inspections due to lack of supply. It would appear almost no one is moving!”
Try looking down. Plenty of activity.
How about brokering for Haitians who want to consult for the formerly middle-class on their street survival skills? Low margins but business should be brisk.
Did I mention that retail investing these days is a lot like foraging for nuts and berries?
The Fed’s great accomplishment is the demolishing of political will. The crisis “passed” without reform.
For obvious reasons the apartment developers are motivated by profit. So inexpensive housing shrinks as the Soviet style Great Society monstrosities are pulled down. New city housing is probably a stretch for middle class, much less ex-middle class. I have no answer for this.
Maybe the next recession will open all those ex-urban buff colored McMansions. 25 people to one kitchen (but 3 bathrooms).
Who speaks for ex-middle class? The demagogue?
With these pathetic quasi-NIRP policies in effect for years, thanks to a clueless Federal Reserve, this senior citizen has reduced his discretionary spending and paid off all debt including mortgage and vehicles. I just refuse to participate in this 7-year old supposed recovery where income is reduced on Main Street in order to manipulate new record highs on Wall Street.
“where income is reduced on Main Street in order to manipulate new record highs on Wall Street.”
+1000
You absolutely nailed it.
The Fed isn’t clueless….they know exactly what they are doing. Destruction of the middle class was the plan. Destruction of the people’s will was the plan. SSI will be cut 0ver 30% or worth less within a short time. No, TPTB have succeeded very well. We still deny what their goals were: our ruin.
We still allow ourselves to be distracted by entertainment, miserable candidates and bad food. The rest of the world is moving on. In my southwestern state, on my country road, the illegals have left mostly, due to no work. My friends either don’t work at all or went back to college. The small businesses are struggling, but even Whole Foods is working hard to keep a margin. Chem trails in the sky daily. Hey, it’s time for a big war.
Let’s don’t forget micro-brews. That’s a booming business. Student loans are assisting as not many are likely to be paid off. So there’s that ready clientele. You can also count on lawyers, compliance officials, and their contracted functionaries. Nothing like a couple spiky IPA’s after ten hours of compliance meetings. And the school teachers after another rough day supervising the end of Civilization. And once you’ve partaken it’s impossible to return to grocery store beer.
That’s what i’m doing. It’s one of the bright spots in the economy. There’s a lot of inflation in hop prices though due to demand and a bad harvest.
A bright spot in every way. Tried to drink a Heineken recently. I’d gotten accustomed to high quality and I could only quaff with difficulty.
I can’t imagine how distressing that must have been. It’s as if the mega brewers have been keeping people in the dark since prohibition ended. That vail has been lifted.
hops are easy to grow, once they get established!
And the mainstream media wonders why the non establishment candidates have so much traction amongst the population. Looks like we’ve reached the Potemkin village era.
The “recovery” narrative died sometime between October 2014 and early 2015. Something happened then but I’ll be damned if I know what shook up the hedge funds…
2014 – 2015
One huge demographic development took place:
The millenials (18-34) now outnumber the baby boomers as the largest segment of the population. The boomers are beginning to “kick off” in ever growing numbers. Those millenials who live in their parents basements will inherit the house, so won’t have the need for “new” housing. Nor any of the “trappings” that go along with setting up new households. Don’t look to the millenials to consume the economy out of depression.
Not sure if you are implying that the millennial population overtaking the boomers (according to estimates) is the main reason for a non recovery. The largest/fastest growing segment of the millennial population are immigrants which overall have been a huge negative (IMHO) on our economy, and all by design.
We moved out of south Florida into the oil patch and things look a lot better here than they did in FL. The taxes are higher but the cost of living is lower. I’m seeing the economy is definitely regional.
From my limited prospective, I don’t see massive oil layoffs. IBM is having a job fair and is hiring. Independent retailers are plentiful, compared to FL, where they had mostly disappeared. They even have an independent computer parts retailer which you can’t find anywhere in FL. I drive by places where they still make stuff. I haven’t seen that in so long I keep pointing them out to my son.
The sales taxes are high, so we definitely shop the sales to make up for the increase cost. Food costs are about the same but the quality of items available is a big improvement. Overall I don’t miss FL.
petunia – didn’t you get about a 10% budget increase as Texas does not tax groceries? I live north of the Red River but have started “going to Texas” to get my groceries….:)
The problem with living in SF is that you’ll probably be the last to see any slowdown whatsoever excepting real estate. Coffee shops, etc are still overflowing with customers every morning and people are now used to paying 5 dollar coffees.
I walked up Sutter from Sansome and Market to my dentist. So many papered-over store fronts!! I mentioned this to my dentist, who lives in SF, and he said he noticed as well. Lots of retail shutting down, in downtown SF. Compared to twenty years ago, 1:30 PM at Montgomery and Market feels like a ghost town. If coffee shops are “overflowing” it’s because of free Wi-Fi at Starbucks and other locales. People nursing a coffee….cheaper than nursing a beer.
Economies do vary quite a bit by state. I live in WI a republican backwater and actually ‘home’ of the original republican party. MN our neighbor has been running circles around us. They have a minimum wage law that does NOT include a “tipped” worker to be paid less. Restaurant prices are the same (go figure). A highly educated progressive state is MN. WI languishes behind old ideas, old customs, same old results.
Manufacturing, agriculture, and consumers rule both states. Why the differing results? Oh, that’s right…
When will we ever learn?
Our economy has already been “fixed” for quite some time. Now, I suggest it needs to be repaired.