Inflation Staggers Public, Economy Still Seen as Fixable

Overview

The public continues to be extremely downbeat about the national economy. Just 10% say the economy is in good shape, while 72% say the economy is either in a recession (54%) or a depression (18%). On a personal level, concerns about rising prices have surged. Beyond widespread anxiety about energy costs, a growing number of Americans say it is difficult for them to afford food.

The percentage of Americans who cite rising prices as the nation’s most important economic problem has nearly doubled since February – from 24% to 45%. Nearly two-thirds (64%) now say their incomes are not keeping up with the rising cost of living, which also is up substantially from February (58%). The number saying it is difficult to afford food has followed a similar upward path; 38% say that now, compared with 27% five months ago.

While rising costs are clearly the top economic problem in the public’s view, it is far from their only concern. More than seven-in-ten (73%) say good jobs are difficult to find, compared with 55% a little more than a year ago (June 2007). The proportion saying that local real estate prices are declining has jumped since February, from 41% to 56%.

The multiple economic concerns are taking a toll on public optimism. About half of Americans (51%) expect their personal financial situation to improve over the next year, down from 55% in March and 60% in January. Yet despite the worsening economic perceptions, the public does not see the economy as beyond repair. Nor do they believe that the government is incapable of fixing the economy in an era of global economic interdependence.

Nearly three-quarters (72%) believe that “something can be done to deal with the problem of rising prices.” This is virtually identical to the number who held this opinion in the fall 1980, when inflation was much greater than it is today. And while most Americans say that the global economy is having an impact on the way things are going in the U.S., only a minority (26%) expresses the view that the government is powerless to fix the economy as a consequence.

The latest national survey by the Pew Research Center for the People & the Press, conducted July 23-27 among 1,503 adults, finds that nearly nine-in-ten voters (87%) say that when it comes to the economy, it matters who is elected president; 64% say it matters a great deal. In this regard, far more voters say that Barack Obama, rather than John McCain, can do a better job of improving economic conditions (47% to 32%).

This is a slightly narrower advantage for Obama on the economy than in June (51% to 31%); however, the survey also finds that McCain’s advantage on terrorism is a bit smaller than it was a month ago. Moreover, Obama runs about even with McCain as the candidate better able to handle foreign policy (43% McCain vs. 42% Obama). In September 2004, George Bush held a 16-point lead over John Kerry on foreign policy.

These opinions may reflect some positive reaction for Obama’s recent visit to the Middle East and Europe. However, the survey shows no overall gain for Obama in the presidential horserace. At 47% to 42%, his lead is about what it was in late June (48% to 40%). As was the case in June, independent voters split evenly between McCain and Obama (43% McCain, 42% Obama).

The weekly News Interest Index showed that Obama’s tour drew considerable public attention. Overall, 62% said they heard a lot about his trip to Europe and the Middle East, which is among the highest measures of public awareness of any campaign event to date.

Nearly half (48%) of those who heard about his trip say they learned at least something about Obama’s foreign policy, but only 15% feel like they learned a great deal about his approach. A narrow majority (52%) says they learned not much or nothing at all about his approach to foreign policy as a result of the trip. (For more information, see July 31, 2008 report: Obama’s Trip a Top Campaign Event for Public.)

Globalization Faulted

The survey finds that, amid increased public skepticism about the benefits of free trade, the public takes a decidedly negative view of the impact of the global economy on the United States. Eight-in-ten say the global economy has at least a fair amount of influence on the U.S. economy, and 35% say it has a great deal of influence.

The vast majority of those who believe the global economy affects conditions in the United States say it is having a negative impact. Notably, there are virtually no partisan differences in this opinion: 65% of independents and Republicans, and 63% of Democrats, say that the global economy is having a negative impact on the way things are going in the United States.

The broad sense of national dissatisfaction with current conditions – 74% express a negative view of national conditions, up nearly 20 points from July 2004 – is reflected in other measures as well. Disapproval of President Bush has ticked upward, and now stands at 68%, the highest in his presidency. Just 27% approve of Bush’s job performance, which equals the all-time low measured in April.

Causes of Economic Problems

There is broad public agreement that international competition for oil and other natural resources is an important factor in the nation’s current economic difficulties. Fully two-thirds of Americans (66%) say international competition for resources has contributed “a lot” to these problems, more than the percentages citing bad loans by banks, excessive spending by individuals, the budget deficit, and other factors.

Comparable proportions of Republicans and Democrats say international competition for resources and bad loans by banks have contributed a great deal to the nation’s current economic problems. But Republicans are more likely than Democrats to blame excessive spending, and too little saving, by Americans: 60% say this has contributed a lot to the economic problems, compared with 48% of Democrats.

By contrast, many more Democrats than Republicans cite the federal budget deficit. Nearly six-in-ten Democrats (59%) say the federal budget deficit has contributed to the nation’s economic difficulties, compared with just 36% of Republicans.

Only about four-in-ten people (44%) say Americans’ buying imported products rather than U.S.-made goods has contributed a great deal to the nation’s economic problems. But those with less education and lower incomes are far more likely to cite this as an important factor: a majority of those with no more than a high school education (52%) say that purchases of imported products have contributed a lot to U.S. economic difficulties, but only about half as many college graduates (28%) agree.

Most Important Problem

The economy now far overshadows the war in Iraq, or any other issue, as the nation’s most important problem. Fully 61% cite an economic concern – including gas and energy prices – as the most important problem facing the nation, up from just 34% in January.

Nearly four-in-ten (39%) point to the economy in general as the most important national problem, about double the proportion in January (20%); another 19% mention gas or energy prices, up from just 3% in January.

About as many people now volunteer gas or energy prices as the nation’s most pressing problem as cite the Iraq war (19% vs. 17%). The proportion mentioning Iraq as the nation’s top problem has declined by more than half since January 2007, when 42% cited the war as the most important national problem.

Two-thirds of Democrats (67%) list an economic problem, compared with 59% of Republicans and 61% of independents. In January, 39% of Democrats, 27% of Republicans and 35% of independents named an economic issue as the nation’s greatest problem.

Democrats also remain significantly more likely than Republicans to view the war in Iraq as the most important problem facing the country (24% vs. 9%). However, Iraq’s importance has declined considerably among members of both parties since January, when 36% of Democrats and 21% of Republicans cited the war as the leading national problem.

Inflation Dominates Economic Concerns

When asked to name the most important economic problem facing the nation, fully 45% volunteer rising prices – with the price of energy cited most frequently (38%). In February, only about a quarter (24%) cited rising prices as the leading economic problem.

Increased concern about inflation and rising prices is evident across nearly all demographic groups. However, in the current survey, suburban and rural residents, as well as less educated people, stand out as being especially worried about inflation.

Those who live in suburban (47%) and rural areas (54%) are more likely than urban residents (37%) to cite prices – and often the price of gas, specifically – as the country’s most important economic problem. In addition, 49% of those with no more than a high school education cite rising prices as the leading economic problem, compared with 38% of college graduates.

Views of Personal Finances

A solid majority of Americans (56%) now rate their personal financial situations as only fair or poor, compared with 42% who say they are in excellent or good shape financially. In January, as many people rated their finances positively as viewed them negatively (49% each).

Most people expect their finances to improve over the next year. But the percentage expressing personal financial optimism has declined, from 60% in January, to 55% in March, and 51% currently. Roughly four-in-ten (42%) say their financial situation will get worse (28%) or volunteer that it will stay the same (14%).

Personal financial optimism has declined among most demographic and political groups since January. Only about half (49%) of middle-income Americans (those with incomes greater than $50,000 and less than $75,000) express optimism that their finances will improve, compared with 65% in January. College graduates also have a gloomier outlook – 51% believe their financial situation will get better, down from 64% in January.

Young people and African Americans remain optimistic about their personal financial situation over the coming year. Among those younger than 30, seven-in-ten (71%) expect things to improve for them in the next year, compared with only 41% of those older than 50. And though blacks are significantly less optimistic than they were in January, they are still somewhat more likely than whites to expect their personal finances to improve in the next year (62% blacks, 50% whites).

Optimism among African Americans and the young is tied to the fact that their current financial situation leaves much room for improvement: just 22% of blacks and 37% of those younger than 30 rate their current economic situation as excellent or good.

Views of National Economy

The public’s perception of the state of the national economy continues to be overwhelmingly negative. Just 10% rate economic conditions as excellent (1%) or good (9%), while 89% rate them as only fair (39%) or poor (50%).

That marks little changes since the spring; in both March and April, 11% rated the economy positively. But views of the economy are now much more negative than they were last year at about this time. In June 2007, a third said the economy was excellent or good, while 65% said it was only fair or poor.

Perceptions of the national economy are now about the same as they were during the recession of the early 1990s. In January 1992, for example, 12% viewed the economy positively, while 87% said it was only fair or poor.

Most Say Economy is in Recession or Depression

While economists debate whether the economic slowdown has met the technical definition of a recession, more than half of the public (54%) says the economy is in recession while another 18% say it is in a depression.

As was the case in March, there are partisan differences in these assessments. Democrats (83%) and independents (71%) are the most likely to hold these views. A smaller majority of Republicans (55%) say the economy is in a recession (45%) or depression (10%).

There are notable differences among Republicans over the state of the economy. Just half of conservative Republicans say the economy is in a recession or depression; about as many (49%) say the economy is either just having a few problems (26%) or is in excellent or good shape (23%). By contrast, two-thirds of moderate and liberal Republicans (68%) say the economy is either in a recession (49%) or a depression (19%). There are much smaller differences among Democrats in views of the state of the economy.

Not ‘Normal Ups and Downs’

A large majority of Americans who see the economy as only fair or poor say the problems facing the country are not just part of the “normal ups and downs” the economy experiences from time to time; rather, say 78%, the problems are deeper and more serious.

While majorities of all groups express this sentiment, it is particularly widespread among those with modest and middle-incomes; 85% of those with annual family incomes of less than $50,000 who rate the economy negatively characterize the nation’s economic problems as deeper and more serious, compared with 68% of those with incomes greater than $75,000.

There are clear political differences on this question as well. Almost nine-in-ten (88%) Democrats who view the economy negatively contend that the problems are serious and deep; this view is universally shared among liberal Democrats (95%). Just 60% Republicans say the problems are deeper and more serious than normal.

While views of the current financial climate are decidedly negative, only a minority of Americans (30%) expect things to get better in the next year. More than twice as many people say they expect conditions to stay the same (41%) or get worse (21%).

Views about whether the economy will improve vary little across demographic groups or by party. However, among the most pessimistic are those with the lowest incomes: 27% of those in households making less than $30,000 a year say that the economy will be in worse shape next year.

Affording Necessities

For many Americans, it is getting harder to afford some of life’s most basic necessities. As was the case earlier this year, majorities now say it is difficult to afford gasoline (68%), retirement savings (59%), and taxes (52%). In addition, nearly half of the public says it is difficult to afford home heating and electric bills (49%) and health care costs (46%). While most Americans still say it is easy to afford food, the percentage saying this is difficult for them has risen dramatically since February. Currently 38% say it is difficult to afford food, up from 27% in February.

The percentage saying it is difficult to afford gasoline also has increased significantly – going from 60% in February to 68% currently. In addition, somewhat more Americans are now saying it is difficult to afford utility bills and retirement savings than said so just five months ago.

The proportion saying it is difficult to afford food is substantially higher than it was in January 1992, in the midst of a recession and widespread economic anxiety. At that time, a quarter of the public (24%) said it was difficult to afford food, compared with 38% currently. In addition, more now say it is difficult to afford heating and electric bills than did in January 1992 (49% now vs. 38% then).

The rising cost of food is having the biggest impact on lower and middle-income Americans. Nearly half (46%) of those with family incomes of between $20,000 and less than $50,000 a year say it is difficult to afford food, up from 34% in February. Among those with lower incomes (less than $20,000), 60% say it is difficult to afford food, up from 50% in February.

While affording food has become more difficult for those in the lower income categories, the rising price of gasoline is felt across all income groups. For those making between $50,000 and less than $100,000 a year, 69% say it is difficult to afford gasoline, up from 57% five months ago. And even among those in households making $100,000 a year or more, nearly half (47%) say it is now difficult to afford gas – up from 38% in February.

Inflation Takes a Toll

A growing majority of Americans say their family’s income is falling behind the cost of living. Nearly two-thirds (64%) now say their income is lagging behind rising costs, up from 58% who said this in February of this year. Only 28% now say their income is staying about even with the cost of living and a mere 6% say their income is going up faster than the cost of living. As recently as September 2007, the public was evenly divided on this issue: 43% said their incomes were staying about even with the cost of living and 44% said their incomes were falling behind.

Those in lower income groups are the most likely to say their incomes are falling behind rising costs. However, even among those in the highest income group (annual incomes of $100,000 or more), nearly half (48%) say their incomes are falling behind.

While most Americans say their family incomes are not keeping up with the cost of living, the proportion saying they owe more than they can afford on credit cards and non-mortgage debt has not changed substantially in recent years. Currently, 10% say they owe a lot more they can afford on credit cards and other non-mortgage debts; 12% say they owe a little more than they can afford.

Jobs Are Scarce – Especially Good Jobs

Most Americans (58%) say jobs are difficult to find where they live, while just 31% say plenty of jobs are available. The proportion saying there are plenty of jobs available locally has remained stable since April (30%), but has declined by 10 points since November 2007 (41%).

There has been an even larger decline in the percentage of Americans saying good jobs are available in their communities. Nearly three-quarters (73%) say good jobs are difficult to find locally, while just 22% say there are plenty of good jobs available. In June 2007, 55% said good jobs were difficult to find, while 36% said they were in ample supply.

Nearly two-thirds of those with family incomes of $100,000 or more (64%) now say that good jobs are difficult to find locally, up from 40% in June 2007. The change in perceptions about the availability of good jobs has been as dramatic among those making between $50,000 and $100,000.

By contrast, perceptions of the local market for good jobs have changed less over the last year among those with lower incomes, who already largely believed that good jobs were difficult to find.

There also has been a sharp increase in the proportion of Republicans saying that good jobs are difficult to find in their local areas (from 38% in June 2007 to 60% currently). More Democrats and independents continue to say that good jobs are in short supply (79% and 74%, respectively).

Real Estate Slump

Americans have grown markedly more negative in evaluations of their local real estate markets since earlier this year. Fully 56% say that home prices in their area have declined a little (32%) or a lot (24%). In early February, 41% said prices had fallen a little (23%) or a lot (18%).

Homeowners have a particularly gloomy assessment of their local real estate market. Currently, just 27% say prices have risen while 63% say they have fallen. In early February, homeowners were evenly divided, with 44% saying prices had risen and 45% saying they had dropped.

Fully 68% of those who have mortgages, and 55% of those who own their homes outright, say home prices have fallen in the past year; in February, 49% of mortgage holders, and 39% of those who own their homes outright, said that local home prices had declined. By contrast, just 42% of non-homeowners say prices have fallen, up more modestly from 32% in February

People who live in the West are more likely than those in other regions to say that local home prices have declined; 70% of those in the West say that, compared with 60% in the Midwest and about half of those in the South (49%) and East (49%).

But Most Expect Prices to Rise

Looking to the future, however, people are somewhat optimistic. More than half of Americans (54%) expect home prices to increase over the next few years. That is little changed since February, when 55% expected prices to rise.

Prospective views of the local real estate market vary little between homeowners and non-homeowners. However, among homeowners, somewhat more who have mortgages expect prices to rise than do people who own their homes outright (59% vs. 49%).

Politics: Obama Maintains Lead

In the general election matchup, Obama currently leads McCain by five points, 47% to 42%, among registered voters, a slightly narrower margin than Obama’s lead in June 2008 (48% to 40%). Both candidates continue to draw overwhelming support among voters in their own parties – 86% of Republicans support McCain and 81% of Democrats support Obama. Independent voters remain divided; roughly the same number say they would vote for the Democratic candidate (42%) as say they would vote for the GOP candidate (43%).

As was the case in June, Obama’s leads by wide margins among voters younger than 30 (56% to 36%); the least affluent (57% to 28% among those with family incomes under $30,000); African Americans (86% to 5%); and the religiously unaffiliated (61% to 30%). The Illinois senator also holds a double-digit advantage among women (50% to 39%) and Catholic voters (52% to 41%).

Among Democratic and Democratic-leaning voters who favored Hillary Clinton as the party’s nominee, slightly more now back Obama than did so a month ago. Nearly three-quarters of former Clinton supporters now prefer Obama (72%), up from just 59% in May.

However, 28% of those who supported Clinton say they will vote for McCain (17%), vote for someone else (1%) or are undecided (10%). McCain is favored by 88% of Republican and Republican-leaning voters who supported someone other than McCain for the party’s nomination

McCain also receives considerably more support than Obama among white voters, especially white evangelical Protestants. The Arizona senator holds a 50% to 40% margin among all white voters and an even wider 69% to 20% lead among white evangelical Protestant voters. McCain also performs better than his opponent among the most affluent; 50% of those with family incomes of $100,000 or more would vote for McCain if the election were held today and 40% would vote for Obama.

Solid majorities of supporters of both Obama and McCain continue to see their choice as a vote for their favored candidate and not as a vote against his opponent. About two-thirds of those who back Obama express affirmative support for him (68%) and just 25% say their vote in anti-McCain. Among McCain’s supporters, 59% say their choice is pro-McCain, while 35% describe it as anti-Obama. By contrast, fully half of John Kerry’s supporters said their choice was more anti-Bush than pro-Kerry in November 2004.

Gap in Strength of Support Narrows

While McCain continues to receive considerably less strong backing from his supporters than Obama does from his, the disparity in strong support for the two candidates has narrowed somewhat since last month. About a quarter of all voters now describe themselves as strong Obama supporters (24%), compared with 17% who say they back McCain strongly. In June 2008, twice as many voters said they supported Obama strongly as said the same about McCain (28% vs. 14%).

Of the 47% who back Obama over McCain this fall, about half (24% of voters overall) say they support him strongly and roughly the same number say they back him “only moderately” (22%). Last month, 28% said they supported Obama strongly, while 19% said they supported him only moderately.

Who Would the Candidates Favor?

One-in-five registered voters say that, if elected, Obama would do too much for African Americans, slightly more than say he would do too much for environmentalists (16%). When asked how different groups would fare if McCain were elected president, on the other hand, nearly half of all voters (45%) say he would do too much for the wealthy. By contrast, just 16% say McCain would do too much for Christian conservatives, a group that supports him over Obama by a double-digit margin; the same number say he would do too little for that group.

Perceptions that Obama would do too much for blacks are most pronounced among Republicans (31%), white evangelical Protestants (30%), and conservative voters (26%). Fully 76% of black voters say Obama would do about the right amount for African Americans while 8% say he would do too little.

White working class voters are considerably more likely than those with a college degree to say Obama would do too much for blacks. A quarter of less educated white voters say that is the case, compared with 16% of those who graduated from college. But white working class voters are even more likely to say McCain would do too much for the wealthy. Fully 43% say that is the case.

The view that McCain would do too much for the rich is shared by a solid majority of Democrats (64%) and 43% of independents, as well as by more than one-in-five Republican voters (22%). And while those with family incomes of $100,000 or more are somewhat less likely than those in lower income brackets to say this is the case, fully 39% in this group think the GOP candidate would do too much for the wealthy.

Conservative white evangelical Protestants are among the most likely to say John McCain would do about the right amount for Christian conservatives; six-in-ten express that view, roughly the same number that says Obama would do too little (57%). A sizeable minority in this group (24%) also says McCain would do too little for Christian conservatives.

Voters express starkly different views of how environmentalists would fare under a McCain or Obama administration. Only about four-in-ten (39%) say McCain would do the right amount for environmentalists; about the same percentage (40%) says he would do too little. A majority (56%) says Obama would do the right amount for environmentalists, while just 13% say he would do too little.

McCain’s Lead on Terrorism Narrows

McCain continues to hold a sizable advantage over Obama as the candidate who is seen as better able to defend the country from a terrorist attack, but the Republican’s lead has narrowed considerably since June. Currently, just under half of all voters (48%) say McCain would do the better job on terrorism, compared with 33% who choose Obama. Last month, McCain held a 55% to 31% lead on this issue.

The survey, which was conducted during Obama’s trip to Europe and the Middle East, also finds that voters are divided on the question of which candidate would to the better job on foreign policy. About the same number name McCain (43%) as name Obama (42%). And when it comes to making wise decisions on Iraq, in particular, McCain holds a narrow 44% to 41% advantage.

The economy remains Obama’s strength. The presumptive Democratic nominee holds a 15-point advantage over his opponent on this issue (47% to 32%). Obama held a slightly wider lead in June; 51% said he was better able than McCain to improve economic conditions and 31% preferred McCain on this issue.