EDITOR NOTE: The market is celebrating a new vaccine that so far appears to have more than a 90% success rate in combating the effects of the coronavirus. It’s going to take time for the vaccine to be stockpiled and distributed. In the meantime, pandemic cases are rising, millions of Americans remain unemployed, millions of renters are about to face eviction, and many businesses are either on the verge of debt default or bankruptcy. The decline in Investors Business Daily’s Economic Optimism Index should come as no surprise. How well might Americans survive the near-term as we await a second stimulus, a vaccine, and a new president?
Americans have turned modestly pessimistic over the near-term outlook for the U.S. economy, amid surging coronavirus cases and a lapse in fiscal stimulus, the November IBD/TIPP Poll finds. The six-month economic outlook index retreated to 47, after registering optimism in October for the first month since February. Readings below 50 reflect pessimism.
The overall IBD/TIPP Economic Optimism Index backtracked to the neutral 50 level, after rising to a solidly optimistic 55.2 the prior month.
The survey came as coronavirus cases spiked to a daily average of more than 100,000, but before good news on Pfizer's vaccine candidate hit on Monday.
The IBD/TIPP Poll finds a wide divergence in economic optimism based on income. Income groups up to $75,000 a year are moderately pessimistic, while Americans earning above $75,000 remain strongly optimistic.
Among investors, with at least $10,000 in household-owned equities or mutual funds, the IBD/TIPP Economic Optimism Index slipped 4.3 points to 57.5, after hitting a 13-year high in October. Among noninvestors, the Economic Optimism Index fell back into pessimistic territory, slipping 4.9 points to 45.5.
Coronavirus Jobs Recovery Still Has A Long Way To Go
Last Friday's jobs report showed that the U.S. economy added 638,000 jobs in October, bringing the recovery's total to 12. 1 million since the April bottom. However, payrolls are still 10.1 million below their February peak.
The IBD/TIPP Poll finds that 46% of households have at least one person looking for a full-time job. Another 42% are concerned about job loss in the household. "The share of job-sensitive households is currently 61%," said Raghavan Mayur, president of TechnoMetrica, IBD's polling partner.
Meanwhile, the coronavirus boost to unemployment benefits has lapsed, and some Americans with long spells of unemployment are losing eligibility for jobless benefits.
The Financial Related Stress Index moved from 65 last month to 66.7 this month, the highest since April. Readings above 50 reflect rising stress.
2020 Election Shifts Views Of Economy
Political views are always a factor in how Americans view the U.S. economy. Under President Trump, Republicans are invariably more upbeat about the outlook, just as they were gloomier under President Obama.
Now a new shift appears to be underway. IBD/TIPP Economic Optimism Index surveys were conducted over the three days following Election Day, before media outlets declared Joe Biden the winner on Saturday, though the outcome had appeared likely for a couple of days.
That context may help explain why IBD/TIPP Economic Optimism Index readings showed Democrats growing less pessimistic (up 6.6 points to 49.1) and Republicans' optimism dimming (down 16.1 points to 57.9). The IBD/TIPP Poll readings were the highest for Democrats and lowest for Republicans since November 2016.
Meanwhile, independents turned more pessimistic (down 7 points to 41.3).
Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term prospects for the U.S. economy, the outlook for personal finances, and views of how well government economic policies are working.
The six-month outlook for the U.S. economy fell 7.1 points to 47. The six-month economic outlook index hit a 14-year high of 57 in February, then tumbled as low as 37.3 in July. For the first time since November 2016, Democrats are now more optimistic about the near-term outlook than Republicans.
The personal finances subindex fell 3.3 points to 55.6, still moderately optimistic. The index hit a crisis low of 49.8 in June. January 2020 saw a 15-month high of 64.6 points before the coronavirus spread outside China.
The federal policies subindex fell 5.3 points to 47.3. February's 57.9 reading was the highest since June 2002. Before the coronavirus hit, there was broad support for the Trump economy.
The November IBD/TIPP Poll reflects an online survey of 1,324 adults from Nov. 4 to Nov. 6.
Originally posted on Investors.com