Archive for December 3rd, 2008

Every morning, the Wall Street Journal seems to carry bigger fonted headlines of economic woe. Bailouts. Bankruptcies. Credit crunches. Stock market declines. Foreclosures. With all the gnashing of teeth, it’s no wonder that a recent Quinnipiac University poll found that zero percent of Americans think the economy is “excellent” and only 4% think it is “good.” A full 58% give a diagnosis of “poor.”

But, fascinatingly, when asked about their own economic situations, a full 56% of Americans say they are doing “excellent” or “good.” Why would equal proportions of Americans give the economy as a whole an F, but themselves an A or B?

This is a standard problem with media coverage. We tend to think school shootings are more common than they are, or deaths during marathons, because the ones that do happen get a lot of coverage. A hard-working young family losing their house is a newsworthy story — one that will grab readers and sell papers. The family that continues to go to their same jobs, earn a little bit more each year and pay their mortgage as usual is just not that exciting. So while we know that the latter is closer to our own experience, since we read more about the former, we tend to assume the former is more common.

The truth is that, as economic problems go, we’re not that badly off here. Zimbabwe has almost infinite inflation. Us? Gas is back under $2 a gallon. Our unemployment rate is rising, but even at 7% or 11% (which it reached in 1982) this means that the vast majority of people who want jobs have them. They may not be perfect jobs, or pay as much as we want, but they are jobs nonetheless. When most people who want jobs have them, that means that most Americans will continue paying their mortgages, buying some amount of goods and services and the like. This puts a floor under how bad the bust can turn.

My personal forcast is that the Dow will end 2009 around 10,000 (up 20 percent from where it is now). The economy will come out of recession around the 2nd quarter of 2009 and unemployment will max at 7.1% — higher than any point since 1993, but below the historical averages for these things. I may revise this as I think about it more, but hey — this lack of commitment is part of the fun of a blog.