The U.S. economy appears to be shifting into gear after a grindingly slow first eight years of the recovery, but Americans aren’t feeling it at the moment.
In October, the IBD/TIPP Economic Optimism Index slid 3.1 points to 50.3, remaining in optimistic territory for a 13th straight month, but only barely above the neutral 50 level.
The downshift in sentiment about the economy seems to run counter to most incoming economic news. The stock market keeps setting new records. The jobless rate just fell to 4.2%, the lowest in 16 years. Average hourly wage gains have begun to accelerate and Target (TGT) said last month that it’s voluntarily raising its minimum wage, first to $11 an hour, then to $15 by 2020.
The apparent good news about Americans’ mood turning lukewarm is that polling details suggest it is likely just a blip.
By far the biggest drop came in the South, which turned slightly pessimistic (49.8) in October, after exhibiting impressive optimism in September (59.8).
The poll, which included 887 respondents, was conducted Sept. 29-Oct. 8. Polling for the September IBD/TIPP Poll began before Hurricane Harvey made landfall in Texas on Aug. 25 and ended before Irma came ashore in Florida on Sept. 10.
While self-identified Republicans nationwide remained solidly optimistic (70.6 vs. 71.4 in September), pessimism deepened among Democrats (35.6 vs. 38.8 in September) and took root among independents (48.8 vs. 52.7 in September).
The partisan divergence may have widened because the polling period closely followed another big GOP push to kill ObamaCare and curb Medicaid spending. Although the effort once again failed, it appears to have once again undercut confidence in federal economic policies, one of three components that factor into the IBD/TIPP Poll.
IBD’S TAKE: The stock market’s surge to record heights over the past month seemed to come out of nowhere, but IBD readers were ready to seize the moment. On Aug. 22, IBD shifted its market trend gauge to “confirmed uptrend” from “uptrend under pressure,” the equivalent of a flashing yellow light turning green. Read IBD’s The Big Picture column each day to stay on top of the market direction, a key indicator that lets you know when you can be aggressive and when you should move to the sidelines.
The Economic Optimism Index is a composite of three major subindexes that track views of near-term economic prospects, the outlook for personal finances over the coming six months, and views of how well government economic policies are working.
The gauge of the six-month economic outlook slipped 2.4 points to 48.7.
The six-month personal financial outlook index eased 2.5 points — to 59.5 from September’s 62.0, which was just below February’s 12-year high of 62.8.
The measure of confidence in federal economic policies sank 4.3 points to 42.8. The index had crept into optimistic territory for the first time in a decade in February, before the GOP spent months trying to repeal and replace ObamaCare with nothing to show for it.
Meanwhile, the National Federation of Independent Business said early Tuesday that its Small Business Optimism Index fell 2.3 points to 103.0 in September, adding that more than hurricanes were to blame.
“The drop-off was consistent around the country regardless of region,” said NFIB Chief Economist Bill Dunkelberg.
Still, the pullback comes after the index reached “frothy” levels, and it “remains very high by historical standards.”
Among companies looking to add workers, 86% said they found few or no qualified applicants.
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