Joint Poll Finds the US in Economic No-Man's Land
April 27, 2010
| MoneyRates.com Senior Financial Analyst, CFA
In mid-April, a group of economic experts announced that it was too early to determine definitively when, or even whether, the recession had ended. A poll run jointly on MoneyRates.com and GetRichSlowly.org around the same time shows that many of you feel the same way.
What the Poll Numbers (Don't) Say
The recent MoneyRates.com/GetRichSlowly.org poll asked, "Where do you think the economy sits today?" Just over 1,800 people responded with the following:
- Strong growth--full steam ahead! (2%)
- On solid ground and growing some, thank goodness. (27%)
- Stagnant. Not growing, but at least not getting worse. (41%)
- Not horrible, but it looks like we are going downhill. (18%)
- Free falling--I'm bracing for the worst. (12%)
This is a poll question that MoneyRates.com and GetRichSlowly.org have asked before--in mid-January--and we asked it again in order to get a sense of how perceptions about the economy are changing over time. The responses in January were similar, except that the second-biggest response flipped from mildly pessimistic to mildly optimistic.
Tellingly, though, in both polls, the characterization of the economy as "stagnant" was far and away the biggest vote-getter.
Enter the National Bureau of Economic Research
The National Bureau of Economic Research (NBER) also sees the economy as stuck in neutral. The NBER is a private, nonpartisan organization of eminent economists which is perhaps best known for making the official determination of when US recessions begin and end.
The NBER met on April 8, 2010, and subsequently announced that it would be premature to declare an end date for the recent recession. That doesn't necessarily mean that the economy is still in the recession; it simply means that the NBER feels it is too early to say if and when the recession has ended.
Why this Matters
Why does it matter whether the NBER declares an official end to the recession? After all, isn't it the reality that counts, not the perception? The problem is that when it comes to the economy, perception can influence reality in a number of ways:
- It can affect government policy. Until the government is confident that the recession is behind us, the tendency will be to err on the side of stimulative fiscal and monetary policies.
- It can affect consumer confidence. The optimism of consumers affects their spending habits--and this in turn affects the level of economic activity.
- It can affect business decisions. Hiring and expansion decisions depend in part on a company's economic outlook. If the experts aren't confident the recession is over, why would business leaders pump money into growth strategies?
- It can affect bank rates. Certainly, money market rates and other bank rates have done nothing to indicate an upturn in the economy. If banks were more confident that a sustainable recovery were underway, they might become more aggressive about attracting deposits for use in lending and investment opportunities. Higher bank rates would be evidence that banks were more interested in attracting deposits.
All in all, it looks like the readers of MoneyRates.com and GetRichSlowly.org are feeling same sense of the economy as the high-profile experts at the NBER: things may be looking a little less bleak, but it is still too early to say that a sustained recovery is underway.
