We get these wonderful clues about people all the time. It’s easy to lose sight of the macroeconomic situation when you’re focused on the trees, or at least so many logs at the mill. Let’s take a look.


You’re looking at consumer sentiment. It’s an index, where 1996 is set at 100. The gray bars are periods when the economy was in a technical recession.

When this number is high, more consumers feel good about spending money. They feel like it’s a good time to buy a major household item. The think they’re more better off now than they were last year. They think the prospects for the next six months look good. They think things are looking up for their family over the next year. They’re upbeat.

It’s a useful measure of predisposition before somebody walks into a store. Or even if they will walk into a store.


A marketer’s job, usually, is a lot easier when the number is high.

A marketer’s job is usually a lot harder when the number is low.

It’s volatile indicator. But you eyeball a trend and a general pattern. The gray bars roughly overlap with steep declines in sentiment. The literature is mixed when it comes to whether or not people are good predictors of the economy.

Check out this next chart.



The red line is the unemployment rate, and it’s scaled along the right axis.

I’ve kept the whole series in. Recessions are associated with increases in unemployment. Nothing controversial about that.

The neat thing is just how weakly, if you look at the entire record, consumer sentiment and unemployment are linked. Unemployment was getting better in the 1980’s, while consumer sentiment didn’t appreciably trend. Consumer sentiment didn’t appreciable trend in the 2000’s either.

People felt good in the 90’s. In comparison, we haven’t felt this bad since the early 80’s. Malaise.

That Trend

Consumer sentiment is starting to come back as the unemployment rate declines rapidly. Consumer sentiment is capable of surging upwards, and surging downwards. It’s a fairly volatile index, but when it moves, it moves.

At the core of it, we’re feeling better, but we’re not feeling as good as we used to.

To a big extent, the recovery isn’t distributed equally, and, alienation is particularly harsh in one-industry towns that are so far untouched by government stimulus, or any globalization dividend. It’s easy to see the whole economy recover, but much harder to see how some pockets will.

Implications for Deals and Discounting

Christmas 2012 featured a massive amount of deep discounting. Eternal Black Friday. The tactic of offering a huge loss on a door crasher, followed up with further discounting in store, just to get the traffic up and the conversions going, was widely adopted.

That’s common during a prolonged period of low consumer sentiment.

I’m concerned that it’s now a permanent expectation at best, and, a permanent necessity in certain local economies. People don’t like cheap things, they like to get a great deal. Almost everybody loves to make ends meet, and, to an extent, many are reliant on eating what’s on sale.

We saw some fresh thinking applied to discounting from the valley. A lot of investment flooded into that sector just as the recession was starting to bite. Because that’s what you do during a downturn. You expect demand for discounting, so you invest in the technologists who are going to disrupt in that space. And it was quite amazing to see some people take advantage of daily deals and feel good about it.

You may have read a lot of inside baseball, bitterness really, about sheeple VC’s jumping off the deals bandwagon all at the same time. This preceded Groupon‘s spectacular drama and its battered balance sheet. The investment community is no longer interested in the space. And, to an extent, many technologists are bored of it too.

Deep discounting may end up being a major force for some time to come. Unemployment still has a long way to go, and so does sentiment.