Economic Optimism is Fading and Pessimism is on the Rise

CRAWFORDVILLE - OCTOBER 10: An American flag battered by Hurricane Michael continues to fly in the in the rose colored light of sunset at Shell Point Beach on October 10, 2018 in Crawfordville, Florida.The hurricane hit the Florida Panhandle as a category 4 storm. (Photo by Mark Wallheiser/Getty Images)
Mark Wallheiser/Getty Images

The optimism that has fueled the surprisingly strong economic expansion in the first two years of the Trump administration has faded.

Just 28 percent of Americans think the economy will improve over the next 12 months, according to an NBC News/Wall Street Journal poll released Sunday. That’s about equal to the level of optimism seen in Barack Obama’s second presidential term. At the start of 2018, 35 percent expected the economy to improve.

Pessimism is on the rise. Thirty-three percent of Americans say they expect the economy will get worse, up from just 20 percent in January. That’s the first time pessimism topped optimism since 2013, when pessimism shot up from 24 percent to 42 percent over the course of just a few weeks when the country experienced a partial government shutdown in October as Republican lawmakers and President Obama failed to reach an agreement on government spending.

That spike in pessimism, however, turned out to be a head fake. The economy expanded at a 3.2 percent pace in the fourth quarter of 2013, contracted at a 1.9 percent rate between January and March of 2014, then went on to grow at around a 5 percent rate from April through September. The economy expanded in 2014 by 2.6 percent, the best performance since 2006.

President Donald Trump’s electoral victory was followed by a surge of economic optimism. In December 2016 optimism rose to 42 percent, pessimism falling to just 19 percent.

And that change in sentiment did predict economic gains. Growth rose to 2.3 percent in 2017, up from just 1.5 percent in 2016. So far in 2018, the economy appears to be headed to a 3 percent expansion.

The election of 2016 also marked a dramatic downturn in the share of people who expected the economy to be about the same. This had hovered around 50 percent for the last two years of the Obama administration but declined as many Americans shifted into a more optimistic mood.

This year has seen a shift from optimism, through “about the same,” and now into pessimism. The share of American expecting the economy to be “about the same” share climbed to 43 percent in January, up from 36 percent in the prior year.  Most of that appears to have been fading optimism. And now some of those that moved into the “about the same” column have shifted further into the pessimist column.

As on many things, a sharp partisan divide runs through the economic outlook. Forty-eight percent of Republicans see things improving in the coming year, and just 12 percent see a downturn, according to the Wall Street Journal. Those proportions are reversed for Democrats.

The survey was taken in the second week of December, a period of intense volatility in the stock market.

 

 

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