Pay careful attention to our ongoing measure of economic confidence over the next several days. Confidence in the economy has been drifting more and more negative as the debt ceiling negotiations have progressed (or failed to progress) over the last two weeks, culminating in a weekly average of economic confidence for July 25-31 of -51. That's pretty bad. The downward slope of this economic confidence curve is pretty dramatic. Confidence was at -43 last week (July 18-24), and -34 just two weeks before that. Last January economic confidence was at -19. The current -51 confidence reading is the most negative since March 2009.
One of the purported benefits of the new budget agreement will be to restore not only Wall Street and investor confidence in the U.S. economy, but also to restore confidence among average Americans. Restored confidence is obviously much needed on the part of average Americans. Will we see a U-turn in the downward slope of the confidence curve now that the agreement has been reached? The answer to that question is a real key factor to monitor.
Meanwhile, we will also be tracking President Obama’s job approval rating, which he and his advisers are also no doubt hoping will improve. Last week’s 42% average was the lowest of his administration. In terms of the Gallup Daily tracking three-day average that Gallup routinely reports, Obama hit a new low of 40% last week, but by Tuesday was back up to a three-day average of 42%. Obama thus continues -- so far -- to avoid a symbolic drop into the 30% range. This is pretty significant, because most presidents in the modern era have in fact seen their job approval ratings drop below 40%.
President Ronald Reagan’s job rating fell into the 30% range by the 24th month of his presidency (in January 1983). Bill Clinton’s approval rating fell to below 40% in the fifth month of his presidency (in June 1993).
Job approval ratings for the two President Bush’s were buoyed in their first terms by highly unusual events -- George H.W. Bush by the Persian Gulf War, and George W. Bush by the Sept. 11, 2001, terrorist attacks. The elder Bush didn’t drop below 40% until February of 1992, in his fourth year of his presidency. This was bad timing, of course, since he was, at that point, already running for re-election. His ratings crashed down even further as 1992 progressed, and -- of course -- he lost to Bill Clinton that fall. The younger Bush went through his entire first term without ever dropping below 40%, a milestone he did not reach until October 2005, about a year after he had been re-elected. The younger Bush, like his father, ultimately found his ratings in the 20% range before he left the presidency.
Only two presidents in the modern era of polling -- since World War II -- did not drop below the 40% job approval rating level at all -- Dwight Eisenhower and John F. Kennedy. Eisenhower, in fact, only dropped below the 50% level twice in his presidency, in March/April 1958, and in January 1960. Kennedy’s lowest job approval rating was 56% in September 1963, just a couple of months before his assassination in Dallas later that year. How low JFK's approval rating might have fallen had he lived is unknown. What is known is that his standing was beginning to suffer from a major drop off among Southern whites as a result of his administration's involvement in civil rights actions.
Another measure we are watching is Congress' job approval rating, our monthly update of which we will have within a week or two. Based on all available evidence, it would seem to be a reasonable hypothesis that Congress approval is going to go down, not up -- but we will have to wait and see.