The latest employment numbers confirm the sinking sensation of the past several weeks after reports of softness in retail, a dip in manufacturing, weakening leading indicators, worsening home prices, a slumping stock market. Why has the recovery come off the rails once again? Is it because gasoline prices ticked up, or China is slowing, or the EU debt problems have flared up again? None of the above.
Here’s a different theory: Americans are sick to death of the dysfunction within our government. The nation knows we are facing serious challenges; our leaders appear unable or unwilling to meet those challenges. That same frustration that drove grey-haired Boomers to join up into Tea Parties – for many their first-ever experience with political activism – is pervasive. It is also bipartisan.
How does this translate into a weak jobs report? Simple. As people lose confidence that those in charge are going to set the country straight, they begin to worry. They worry about their savings, about their kids’ education, about getting a job; they begin to pinch. They put off buying a car, or a home, and the retail climate grows murky. Small business owners can feel the uncertainty, and they postpone hiring. America’s animal spirits – the confidence that anything is possible, that the government has your back – are in retreat.
Look at consumer confidence. The Conference Board index slumped sharply in May. Lynn Franco of that organization said those surveyed were “apprehensive about future business and labor market conditions as well as their income prospects.” She also cited increased concerns about inflation.
The Gallup organization has also tracked the country’s slumping optimism. In their view the drop began earlier – in April. Their polls indicate that only 27 percent of Americans think economic conditions are getting better down from 41 percent at the beginning of the year, and 41 percent a year ago. That’s a sizeable drop, and is in line with Gallup’s view that “the jobs situation shows little improvement over the first four months of 2011 and even less improvement compared with a year ago.”
Gallup (in conjunction with Wells Fargo) also surveys small business owners – those most responsible for job creation in our economy. That group’s ratings of their business conditions took a hit in the past month as well, with the index plunging from positive territory to neutral ground. Gallup attributes much of the fall-off to “the current political atmosphere.” As they point out, after the GOP sweep last fall, and a seeming move to the center by President Obama, Americans cheered up – and among other things spent more money at Christmas than had been expected. Indeed, the Conference Board figures reflect that consumers immediately perked up about their future prospects in November and December.
Since then, hostilities have resumed in Washington, and we are back to wondering who will lead us out of the trough of despair. Republicans are anxious about finding the perfect candidate; Democrats worry that the worsening economy will undermine President Obama. Everyone is concerned that our fiscal and monetary guns are now firing blanks; another stimulus or quantitative easing program is unlikely.
Our problems are not going away, and they are grave. The budget deficit is not a mythical beast conjured up by alarmist Republicans hoping to unseat President Obama – it is a living, breathing threat to our nation’s future. We need someone – anyone – to break out of the quagmire of partisan politics and show us the way forward. Until that time, it is hard to imagine the recovery gaining momentum.