Nearly three out of four Americans say the economy isn’t doing well on President Joe Biden’s watch, according to a recent Economist/YouGov poll, while a separate survey showed that a record share of Americans believe the country’s best years are behind us.
The Economist/YouGov poll (pdf) shows that just 22 percent of Americans think the state of the economy is excellent or good, while a whopping 73 percent think it’s fair or poor.
Asked whether they approve of Biden’s handling of jobs and the economy, a greater share (48 percent vs. 42 percent) said they disapprove.
More gloom was expressed by people responding to a recent NBC poll, which showed that 74 percent of Americans believe the country is on the wrong track.
NBC anchor Chuck Todd revealed the numbers on Sunday’s edition of “Meet the Press,” telling the audience that this figure has now stayed above 70 percent for nearly a year, the longest stretch in the history of the poll.
‘Severe Recession’ or ‘Mild Dowturn’?
The pessimistic readings come amid growing fears of a sharp economic downturn as persistently high inflation pressures the Federal Reserve to hold the course on aggressive monetary policy tightening.
Some prominent economists have warned of a U.S. recession that could be long and severe, with economist Nouriel Roubini recently describing analysts’ predictions for a short and mild economic downturn as “delusional.”
Some analysts reject the outlook for a long and severe recession, with Bank of America Chief Economist Michael Gapen telling Fox News in a recent interview that he expects a “mild downturn.”
The recessionary drumbeat got louder last week as a key economic gauge from the Conference Board dropped for the fifth month in a row, weighed down by a slowing job market, weak manufacturing new orders, and deep consumer pessimism.
Rate Hikes to Continue
Investors will be keeping a close eye on this week’s annual Fed meeting in Jackson Hole, Wyoming, after minutes last week from the central bank’s recent policy meeting affirmed plans to keep hiking rates in a bid to quell inflationary pressures despite signs of economic weakness.
“The minutes to the Federal Reserve’s July FOMC [Federal Open Market Committee] meeting point to ongoing rate hikes to ensure that inflation and inflation expectations don’t become embedded,” analysts at ING said in a note.
“However, ‘many’ participants fear they could end up going too far into restrictive territory, which suggests a clear chance the Fed ends up reversing course next year,” the analysts added.
Besides the Jackson Hole meeting, where the Fed will try to shape market expectations, investors will also be looking at the upcoming inflation and jobs data, which will be released ahead of the central bank’s September rate-setting meeting.
“We are still saying 50 [basis points] September, 50 [basis points] November, and 25 [basis points] December, but if we got another 350,000 jobs print for August and CPI failed to show any moderation from the 8.5 percent headline and 5.9 percent core, then we would likely switch to a 75 [basis point] call for September,” ING analysts said.
Fed funds futures contracts show investors fully expect a rate hike in September, according to the CME Fed Watch Tool, with the only outstanding question whether it will be 50 or 75 basis points. At 55.5 percent, the odds are slightly higher for a 75 basis-point hike, compared to 44.5 percent for a smaller rate increase.
A 75 basis-point hike would put the target fed funds rate at between 3.0 percent and 3.25 percent.
A separate market expectations gauge developed by the Federal Reserve Bank of Atlanta shows that investors expect the Fed to hit pause at a fed funds rate level of around 3.68 percent in March 2023, before pivoting and starting to ease to around 3.25 percent by the end of 2023, then down to 2.9 percent by the end of 2024.