Are Things Really as Pessimistic as the Q3 Kauffman Economic Outlook?

I blogged earlier this year on OPEN Forum about the results of the Kauffman Economic Outlook: A Quarterly Survey of Leading Economics Bloggers for the second quarter of 2010. Kauffman recently released its third-quarter Economic Outlook, and the view this time is decidedly more pessimistic.

Sixty-eight percent of economics bloggers who responded to the Q3 survey (conducted in mid-July) described the U.S. economy’s overall condition as “mixed.” None described it as “strong and growing.” The rest were split three to one toward an assessment of “weak.”

When asked for open-ended responses to describe the state of the economy, the most common word bloggers used was “uncertainty,” followed by “weak.” And in response to one survey question, the respondents rated the probability of a double-dip recession at 44 percent.

"Uncertainty is casting a shadow over the economy as well as the debate about the economy," said Tim Kane, senior fellow at the Kauffman Foundation and author of the study.

The U.S. government came in for a fair share of criticism. Just 5 percent of respondents believe the economy is "better than official government statistics show" (down from 14 percent in the Q2 survey); 47 percent think it is worse. Although bloggers responding to the survey mostly identified themselves as nonpartisan, 70 percent believe the federal government is too involved in economic matters.

The U.S. Congress also received the poorest ratings of any organization or institution in the survey. Nearly 80 percent graded it either “D” or “F,” for an overall grade point average of 0.8. (Wall Street garnered a 1.4 average.)

While overall business conditions were rated “fair” by most respondents, the majority (57 percent) say that conditions for small business are “bad” or “very bad.” That number was slightly up from last quarter’s. Bank lending to businesses was also rated “bad” or “very bad” by some 35 percent of respondents.

Conditions for entrepreneurs (which the survey defines as startup businesses) were somewhat better than for small business. Slightly more than 50 percent described these as “fair” (down from 60 percent in the last survey); about 30 percent deemed them “bad” or “very bad” (up from about 20 percent in the last survey).

I am very surprised by this pessimism.  The feedback I hear from business owners and entrepreneurs is that conditions are getting better, although not strongly better.  Even in my own business, things have picked up noticeably since the start of the summer, with more interest from clients and more new business.  I wonder how much of the pessimism is related to the unrelenting negative coverage in the media coloring our perceptions?