For the first time in more than five years, Americans are finally feeling a bit more chipper about their finances.
According to a new Gallup poll released Thursday, 38 percent of Americans reported feeling better about their finances than a year ago--the highest level since October 2007--compared with 34 percent who felt worse off. About 26 percent said they felt about the same.
"Right now it's a more or less a dead heat," says Greg McBride, senior financial analyst at personal finance information website Bankrate.com. "We've seen some improvement given stronger stock market performance, the turn in the housing market, and better news on the job front."
The encouraging report from Gallup comes on the heels of another survey that found economists, too, are feeling more optimistic about the future prospects of the economy.
According to forecasts from nearly 50 economists surveyed quarterly by USAToday, the economy will grow more than 2 percent next year, up from an average of about 1.5 percent in the first half of 2012. For comparison sake, growth of 3 percent or more is considered healthy by economists.
Unemployment is also expected to drop slightly, edging down to 7.6 percent by the end of next year, while job growth could accelerate slightly. Economists predict the economy could add 175,000 jobs a month on average by 2013's fourth quarter, up from a 130,000 monthly average this quarter. The uptick in hiring should coincide with a significant increase in business investment, expected to grow from about 4 percent this quarter to 7.5 percent in the fourth quarter of 2013.
Perhaps most comforting, almost two-thirds of economists surveyed said the so-called fiscal cliff—the large spending cuts and tax increases that kick in at the end of this year unless Congress acts—will be resolved without economic disaster.
Just as economists are feeling a bit more cheerful about the future, so are American consumers. While evaluations of current finances are tepid at best, two-thirds believe they will be better off financially a year from now. Recently that figure had dipped as low as 52 percent in the summer of 2008 amid the unfolding financial crisis and ensuing unemployment woes.
While things remain up in the air in the ultra-close presidential race, this bit of good news could bode well for President Obama's reelection bid. According to Gallup, 66 percent believing better days are ahead for their pocketbooks is on the high side of what the organization has recorded not only in presidential elections but at any time.
Americans' evaluations of their current financial situations are hardly positive, with barely a third saying they are better off than a year ago and nearly as many saying they are worse off," the Gallup poll noted. "In any case, positive perceptions on this measure have increased since 2009, which could benefit Obama."
But as always, the devil is in the details. While longer-term optimism about improved financial situations almost certainly reflects Democrats' confidence in Obama, it may also represent the hopes of Republicans who believe their candidate—Mitt Romney—will be in the White House next year.
Still, according to McBride, with the fiscal cliff threatening to plunge the country into an instant recession in 2013 if Congress doesn't act, the issue is less about who will be in the White House at this point and more about whether lawmakers will avert or go over the fiscal cliff.
"We are looking at an instant recession in 2013 if Congress does not avert the fiscal cliff," McBride says. "It's not going to be fun for anyone nor will it matter who's president. The inauguration isn't until January 20 and we could be three weeks into a recession."