National

Is there good news ahead about the economy or just bad?

The economy has more people shopping outlet stores.
The economy has more people shopping outlet stores. Sarah J. Glover / Philadelphia Inquirer / MCT

KANSAS CITY — Perched over the heads of autoworkers, truckers, nurses, teachers and other working Americans, hairdresser Nancy Lloyd witnesses the weakening economy and festering national angst.

Her regular customers have traded distant summer vacations for nearby visits. They've started to talk about growing vegetable gardens instead of flower beds.

Some show up shaggier than usual, which is to say less often. And as they discuss soaring gasoline and food prices, Lloyd can tell budgets are tightening.

Lloyd, who's been cutting and setting hair for 45 years, tries to cheer her customers and make their stop pleasant.

Even so, tips are down.

"The mood is sober and rather quiet and anxious," she said.

Indeed, the world’s largest economy is tilting between a knee-wobbling credit crunch in housing and on Wall Street on one side and surprising — though widely ignored — strength in agribusiness, energy and exports on the other.

Conflicting economic signals haven't settled economists' pitched debate.

While the economy remains sluggish, we're not officially in a recession. Indeed, the news Thursday is expected to show the economy actually grew faster in April, May and June than during the previous three months.

Friday, however, likely will follow with yet another bad jobs report nationally, pushing the number of Americans thrown out of work this year beyond a half-million.

This much is certain: Sentiments such as those shared by Lloyd are common these days.

Fully 85 percent of Americans think the U.S. economy is seriously off track, according to a new Rockefeller Foundation poll. The number of people who fear for their personal financial security has nearly doubled over the past year, to 47 percent.

It's little wonder citizens' moods have soured.

The median price of an existing home, which for most Americans is their largest investment, is down 6.1 percent over the past year.

The Dow Jones industrial average, which reached a record high last October, has since tumbled more than 20 percent into bear market territory.

Unemployment has jumped from 4.4 percent in March 2007 to 5.5 percent.

Consumer inflation — driven by surging gasoline and food costs — recently crested 5 percent.

In recent months, federal officials have rushed in to prevent the collapse of Wall Street investment bank Bear Stearns and to prop up mortgage giants Fannie Mae and Freddie Mac. An old-fashioned bank run recently triggered the takeover of IndyMac Bank.

"That's the level of fear that has reached something of a crescendo," said Owen McPherson, a money manager in Kansas City.

The Conference Board has put a number on America’s anxiety. Its reading of consumer confidence stood at 51.9 in July, barely a third of the 144.7 score in a comparatively euphoric May 2000.

The last time we felt as measurably glum as the last two months was February 1992, following a recession.

"Households are much more pessimistic about the future than they are about the present," said Steven A. Wood, chief economist with Insight Economics. "If confidence stays at this level or moves even lower, real consumer spending and economic growth will slow even more."

But that's only part of the story.

Thanks to strength in areas of the economy that don't get many headlines, such as soaring farm income and booming exports, the overall economy continues to grow.

Washington forecasts farm income topping $92 billion this year, or 50 percent more than farm income has averaged over 10 years. A reawakening domestic energy industry enjoys the same tailwind from higher prices that food producers enjoy.

Exports are booming, up 18 percent through May this year, as U.S. companies use a weak dollar to break into faster-growing global markets. This new business has offset much of the lost housing activity over the last year.

Thanks largely to recent tax rebate checks from Uncle Sam, consumer spending also has held up better than some had predicted. And now gas prices are starting to come down from recent record highs.

Add it all up and the economy not only continued to grow during the April-through-June quarter, but likely at more than twice the pace of earlier this year. While still moderate, the pace is picking up.

Many pessimists resort to claiming that slow growth doesn't matter — it still feels like a recession. In a meeting last week at the Greater Kansas City Chamber of Commerce, that question was put directly to the economist with his finger on the pulse of the American heartland.

"It’s a matter of degree," said Tom Hoenig, president of the Federal Reserve Bank of Kansas City. "You're feeling bad? If — and I'm not expecting that we'll get into a recession — (there is one) you’ll feel a lot worse."

Lloyd approaches the question in a different way. She ignores the wonky debate in favor of the thought on so many Americans' minds.

"How long is this going to go on?" she said. "We want to know."

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