Economy Watch: Americans Nervous About Economy

By Dees Stribling, Contributing Editor

These are nervous days. Gallup reported on Tuesday that Americans’ confidence in the economy has deteriorated more in the past week during the partial government shutdown than in any week since Lehman Brothers collapsed in Sept. 2008. Gallup’s Economic Confidence Index tumbled 12 points to -34 last week, the second-largest weekly decline since Gallup began tracking economic confidence daily in January 2008.

According to the survey specialist, “fiscal brinksmanship in Washington is related to many of the largest weekly drops in Americans’ confidence in the economy since 2008. Americans’ confidence in the economy fell eight points during two separate weeks in July 2011, as leaders in Washington debated over [whether] to default on the nation’s debts.” Similarly, the report says, economic confidence could continue to fall in the coming days and weeks as the debt ceiling deadline of Oct. 17 looms.

On a more optimistic note, Gallup explained that economic confidence bounced back within several months of the 2011 debt crisis and the downgrading of the U.S. credit rating. That could mean that the fiscal fracas isn’t going to affect consumer confidence in the same long-term negative way that recessions do.

Small businesses more pessimistic

The National Federation of Independent Business said on Tuesday that its small-business owner optimism index dropped 0.2 points in September to 93.9, compared with August’s reading of 94.1—a minor drop. The largest contributing factor to the dip was an increase in pessimism about future business conditions, although this was somewhat offset by an increase in number of small-business owners expecting higher sales.

Overall, four index components improved, four fell and two remained unchanged from August, according to the NFIB. While it’s too soon to measure the impact of the government shut down on the small-business sector, it’s possible that the crisis impacted economic outlook in September, and it’s very likely that the shut down, however it’s resolved, will affect October’s reading.

“The change in this month’s Index was little more than ‘statistical noise,’ but the drop in outlook for future economic conditions is evidence that many owners are keeping an eye on Washington,” NFIB chief economist Bill Dunkelberg noted. “Consumers and small business owners are likely to remain pessimistic, accepting the notion that growth is going to be sub-par and that their government is likely to continuing dysfunctional mode for months to come.”

Wall Street takes another dive

No data from the government again on Tuesday. Postponed reports include job openings and the trade deficit. On the other hand, reportedly President Obama will nominate Janet Yellen as chairman of the Federal Reserve this week, perhaps as soon as Wednesday.

Wall Street’s case of the jitters on Monday seemed to turn into full-blown heebie-jeebies on Tuesday, with the Dow Jones Industrial Average down 159.71 points, or 1.07 percent. The S&P 500 lost 1.23 percent and the Nasdaq declined 2 percent.