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Earthquakes and nuclear meltdowns in Japan, uprisings in the Middle East, scary job prospects, a gargantuan federal deficit, zooming gasoline prices, and soaring food prices … the list of economic challenges facing the world is long and just seems to get longer.
It's tough to remember the last time U.S. consumers and investors faced so much uncertainty. But the worst thing is that there's no clear end in sight.
No wonder consumer confidence remains shaky, at best.
The Thomson Reuters/University of Michigan index of consumer sentiment in March fell to its lowest level in five months as higher gasoline prices lowered U.S. consumer confidence. Low confidence could mean a weak recovery, since consumer spending makes up 70% of the U.S. economy.
"We are in a confidence-driven recovery, not a jobs and income driven recovery," Christopher Low, chief economist at FTN Financial, told Reuters. "So if there's anything like this rise in oil and gas prices, things can turn sour pretty quickly."
Political turmoil in the Middle East and North Africa in recent weeks pushed oil prices into the triple digits, and gasoline prices rose more than 30 cents in the last month. Some economists believe that oil will hit $150 a barrel and pump prices will hit $4 a gallon.
Such a steep increase in oil and gasoline prices threatens U.S. growth – and your family's security. Stunted growth and a high unemployment rate could tip the American economy into its scariest state – stagflation, when rising prices are coupled with little or no economic growth.
The U.S. jobless rate fell to 8.9% in February from 9% the month before, but many economists don't expect it to continue on a steady decline.
"The unemployment rate is going to be very persistent," Edward Leamer, professor of economics at University of California-Los Angeles, told Businessweek. "We had a record number of permanent displacements in the recession."
Many U.S. investors are also concerned about the debt-laden federal, state and local governments. The federal government could hit the $14.29 trillion debt limit as early as next month. If the U.S. government can't borrow more and defaults on bonds, the fallout will hit all of us.
"It would weaken the position of the United States in world financial markets and it would tend to affect the standard of living of Americans as well because it might push the dollar down," University of Texas economist James Galbraith told American Public Media's "Marketplace" program
This brings us to next week's Money Morning "Question of the Week": What are your five biggest worries? What are the five main economic or financial concerns that most concern those in your household? What issues plaguing the U.S. or global economy are most worrisome for you? Why do these issues hit closer to home on your economy radar? What are you doing to financial deal with these concerns?
We're especially interested in your answers to these questions. Not only will these answers appear in next week's "Question of the Week" … we're also going to use them to guide our reporting, commentaries, news coverage and special investment research reports in the weeks and months to come.
So if you have a concern or topic that you want to see addressed, speak up. We really want to hear from you! Send your answers to firstname.lastname@example.org.
We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
- Money Morning:
Japan's Stock Market Plunges as Export Disruption Threatens Global Supply Chain
Japan stock crash raises fear of wider global impact
U.S. could reach debt limit in early April
Instant View: University of Michigan consumer sentiment slumps
What Will the Jobless Rate Be on Election Day?
- Bloomberg News:
U.S. Economy: Unemployment Rate Unexpectedly Falls to 8.9%
- Money Morning News Archive:
Question of the Week Feature