Article published Wednesday, December 29, 2010, at Fox News.

Economy Still On Life Support -- And Americans Know It

By John R. Lott, Jr.

All the economic numbers being thrown around as the year draws to a close are bewildering. Some are positive, some are negative, but for many this week it is hard to get an overall feel for how well the economy is doing.

On the upside, GDP is rising, though slowly, and economists have raised their forecasts for next year's economic growth. Retail sales this holiday season increased by 5.5 percent over last year. Inflation has remained low, just 1.1 percent over the last year. And the stock market has rebounded.

Yet, there are major negatives. Most seriously, the very high and long-lingering unemployment rate. Unemployment is not only rising, but it has set a post-World War II record with unemployment remaining at least at 9.5 percent or higher for 18 months.

Adding to job-seekers' problems, the new employment consists almost exclusively of temporary service sector jobs, a poor replacement for the lost permanent ones. Home prices also fell again last month. Yale Professor Robert Shiller who collects these data, warned on Tuesday: "The outlook has become steadily more pessimistic over the last few months." Huge deficits at the federal and state level add to long-run concerns.

So what do all these numbers mean for the average American? New Consumer Confidence numbers were released on Tuesday and they aren't encouraging, showing that consumer confidence fell in December from 54.3 to 52.5.

The numbers give a rough look at how Americans weigh increasing high unemployment and falling home prices with signs of GDP growth. The Consumer Confidence Index a survey of 5,000 people each month is designed to gauge the relative financial health, spending power and well-being of the average consumer.

But how bad is a score of 52.5? A value of less than 90 for two months in a row points to signs of a recession. And since the index started being issued in 1967 it has averaged 95. In the years since then that the survey has been conducted, 95 percent of the time consumer confidence has been higher than it is now. And a third of those lower scores have occurred during the current recovery.

At this stage of a recovery there has never been such a low consumer confidence score. But to put it even more starkly, the current consumer confidence numbers are lower than the numbers at the end of any previous recession. Compare, for instance, the current numbers with the very deepest post-WWII recession, the one in the early 1980s: When things hit bottom and that recession ended, consumer confidence was at 57.4 -- low, but still higher than today.

Eighteen months later, the equivalent of where we are now time wise, it had soared to 104.8. In contrast, in June 2009, when the latest recession officially ended, the consumer confidence index was at 49.3, increasing to the current level of 52.5.

The consumer confidence gloom is also reflected in recent Gallup polls. When Gallup asked Americans during December about where the economy was heading, 59 percent said things were getting worse and only 34 percent said better.

While holiday sales rose the Consumer Confidence numbers suggest that there were two quite different sets of consumers, with some with secure jobs spending more and others having a much more frugal Christmas.

The current recovery is very different from previous ones and worries about jobs, runaway deficits, and the housing market appear to be dominating people's thoughts. The index not only shows how unhappy people are but it bodes ill for how the economy will look in the near future.

John R. Lott Jr. is a contributor. He is an economist and the author of "More Guns, Less Crime" (University of Chicago Press, 2010), the third edition of which was published in May.

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