Over the first three weeks of August, Gallup's Economic Confidence measure has been at its lowest level since March 2009. Confidence has fallen among Americans of all income levels, but plunged among upper-income Americans making $90,000 or more a year. Normally, upper-income Americans are more optimistic than their middle- and lower-income counterparts, however, this changed in the first weeks of August. By the week ending Aug. 21, 84% of upper-income Americans were saying the economy is "getting worse" while 77% of those having middle and lower incomes felt the same way.
The last time upper-income Americans were more pessimistic than other Americans on a monthly basis was during the financial crisis of November 2008 to March 2009. At that time, Americans were facing both a banking crisis and a plummeting economy. Now as then, upper-income Americans are challenged not only by a slowing global economy and housing depression, but also by the financial crisis in Europe, as well as a highly volatile market and declining values on Wall Street. The situation is worsened by a general loss of confidence in Washington, D.C. -- a feeling of political stalemate -- and a lack of leadership.
The lack of confidence among the upper-income consumers is bad news for the economy since these are the Americans who have the disposable income to spend if they choose. They also tend to be the small business owners and corporate decision makers who decide when to hire and when to let workers go. If upper-income Americans pull back as their confidence plunges, then the U.S. economy could slow even more than most economists are anticipating during the second half of 2011.
It is little wonder many on Wall Street are looking for Federal Reserve Board Chairman Bernanke to come up with another "magic potion" during his time in Jackson Hole this week, like he did with "quantitative easing" last year. The question is whether such a potion exists, and if it does, whether it will do more harm than good. Labels: Bernanke, economic confidence, quantitative easing, upper-income confidence