Americans' Economic Mood Sinks for Second Straight Month

WASHINGTON, D.C. -- Americans' assessments of the U.S. economy worsened in January after an even larger stumble in December, but following seven months when economic perceptions had generally shown modest improvements. The five-point decline in Gallup's Economic Confidence Index to -21 this month puts the index at a level not seen since June.

Gallup regularly tracks Americans' ratings of national economic conditions as excellent, good, only fair or poor and whether the economy is getting better or getting worse. The combined answers are used to create the Gallup Economic Confidence Index, which has a theoretical range of +100 (if all respondents say the economy is excellent or good and that it is getting better) to -100 (if all say it is poor and getting worse).

The latest reading of -21, from a Jan. 4-15 poll conducted just before President Donald Trump left office, marks the second consecutive decline in the index after seven months of steady or slightly improved readings, following the sharp drop at the start of the pandemic. The current confidence rating is 12 points shy of the 2020 low point in April. Still, it is not close to the -72 recorded in October 2008 during the Great Recession.

Decline Driven by Republicans' Worsening Views of Economy

As was the case in December, the decrease in Americans' economic confidence in January was driven by Republicans' increasingly negative views as the Trump campaign's efforts to overturn the election results in key states were rejected by courts, state election officials and state and federal officeholders.

Historically, partisans' assessments of the economy have differed, based on the party of the sitting president. That is, partisans from the same party as the president rate economic conditions more positively than do those from the opposing party. When the president's party changes, so too do partisans' views of a variety of national measures, including the economy. Gallup trends have shown that this change in views may occur as soon as the president is elected, upon inauguration or after some time in office.

Throughout 2020, Republicans' confidence in the economy was in positive territory. While it declined to +5 amid the pandemic, by Election Day, it had rebounded to +56. But after the election, as it became clear that Joe Biden had won, confidence gradually declined -- to +44 in November, +29 in December and -2 now, the first time it has been negative since 2016.

At the same time, Democrats' confidence improved from -52 in October to -42 after the election and has been steady at that level since then. Independents' confidence has been negative since the start of the pandemic and is currently -19.

Partisans' outlook on both dimensions of the index -- the current rating of the economy and whether it is getting better or worse -- follow the same trajectory as the index overall. Republicans increasingly think the economy is fair or poor and that it is getting worse, while Democrats' views have been generally more positive.

Americans Views of the Job Market Worsen Again

In April, the U.S. unemployment rate peaked at a pandemic-fueled 14.8%, and Americans' impressions of whether it was a good time to find a quality job fell 46 points to 22% as millions of workers lost their jobs. By November, the unemployment rate had improved to 6.7%, and 36% of U.S. adults said it was a good time to find a quality job. But in the latest poll, taken as the unemployment rate has plateaued, Americans' optimism about jobs has declined to 27%.

Republicans are also the main drivers of this change, as their belief that it is a good time to find a quality job fell 21 points between November and January, versus minimal change among Democrats and independents.

As with economic confidence, Americans' assessments of the job market vary in response to changes in key economic indicators, such as the unemployment rate. This is evidenced by the steep drop in April 2020 among all party groups. However, even as these assessments shift, party differences persist, with those who align with the sitting president's party consistently evaluating job conditions more positively than others. Such was the case in 2017, as Democrats' views of economic conditions worsened when Trump became president.

Bottom Line

The coronavirus pandemic and resulting shutdowns plunged the U.S. into an economic crisis in the spring of 2020. While there are some signs of recovery, partisans' views of the economy and jobs appear to be largely affected by politics. Partisans' perceptions of the economy have been shifting since the election, as it became clear that Trump had lost the White House. During this period, Republicans' views of the economy have markedly worsened, while Democrats' confidence in the economy has improved. These shifts are likely to continue in the early part of 2021 as the economy moves further away from one shaped by Trump's economic policies to one shaped by Biden's efforts.

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