Americans Remain Pessimistic Despite Mixed Economic Data

The US economy added 175,000 jobs in April, falling short of expectations, while the unemployment rate ticked up to 3.9%. Inflation concerns persist, with the core PCE deflator accelerating to a three-quarter high, prompting worries about persistent inflation.

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Safak Costu
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Americans Remain Pessimistic Despite Mixed Economic Data

Americans Remain Pessimistic Despite Mixed Economic Data

Despite some signs of economic strength, many Americans remain pessimistic about the country's economic prospects in 2024. The latest data paints a mixed scenario, with certain indicators pointing to a slowdown while others suggest a more robust economy.

Why this matters: The economic outlook has a direct impact on Americans' financial well-being, influencing their spending habits, investment decisions, and overall confidence in the economy. A pessimistic outlook can also have broader implications for businesses, policymakers, and the overall direction of the economy.

The US added 175,000 jobs in April, falling short of economists' expect, report of 240,000 new jobs. The unemployment rate ticked up slightly to 3.9% from 3.8% in March. However, economists believe this shift is not necessarily a cause for concern, as layoffs remain low and most sectors appear stable.

Perc Pineda, chief economist at the Plastics Industry Association, maintains an optimistic outlook. "It's not a bad economy, it's still a healthy economy," Pineda says. "I think it's part of the cycle. We cannot continue robust growth indefinitely, considering the limits of our economy."

The US economy cooled in the first quarter of 2023, with GDP growth slowing to a 1.6% pace, the weakest quarterly pace since Q2 2022. This weakness was largely attributed to inventories, trade, and government spending. Personal consumption rose 2.5% in the preliminary Q1 report, less than the 3.0% gain expected and down from a 3.3% increase in the previous quarter.

Inflation concerns continue to weigh on Americans' economic outlook. The core PCE deflator accelerated to a three-quarter high, pushing up longer-dated yields to levels not seen since November. This has led to worries about persistent inflation, with the federal Reserve's outlook for three interest rate cuts in 2024 rapidly becoming outdated.

On Wednesday, Federal Reserve Chair Jerome Powell acknowledged the lack of further progress in combating inflation this year, following three month, review of disappointing data. "It is likely that gaining such greater confidence will take longer than previously expected," Powell stated.

mainbusiness owners are increasingly frustrated with high prices, with 37% citing inflation being the biggest risk they face, compared to 13% who cite consumer demand being the second-biggest threat, according to the CNBC SurveyMonkey Small Business Survey for Q2 2024. The survey also revealed a decline in small business confidence in the Fed, with only 31% expressing confidence, down from 35% last quarter.

Despite inflation fears, over one-quarter (27%) of small business owners describe the economy as excellent or good, a figure that has not trended lower. This optimism is reflected in the 17.2 million new business applications filed during the Biden administration.

Labor market slowdowns and moderating economic growth prompt Americans to consider the implications for their financial well-being. While some view the slowdown as a natural part of the economic cycle, others worry about the potential impact on their jobs, businesses, and investments. With the Federal Reserve struggling to contain stubborn inflation, the path forward remains uncertain, leaving many Americans feeling pessimistic despite the underlying strength of the economy.

Key Takeaways

  • US economy adds 175,000 jobs in April, below expectations.
  • Unemployment rate rises to 3.9%, but layoffs remain low.
  • Inflation concerns persist, with core PCE deflator accelerating.
  • Small business owners cite inflation as biggest risk, with declining confidence in Fed.
  • Americans remain pessimistic about economy despite underlying strength.