But the survey from the Lowe Institute of Political Economy at Claremont McKenna College also revealed a growing disparity in consumer sentiment among income groups, showing how the halting recovery from the pandemic-induced spring lockdowns is playing out differently depending on income level.
The survey of 500 L.A. County residents taken during the last three weeks of September showed sentiment toward current business conditions in the county at an index of 23.6, up slightly from the rock-bottom mark of 22.2 in the second quarter.
To put those numbers in perspective, consumer sentiment for the third quarter of 2019 was 83.2, which followed a then-record low of 82.1 in the second quarter last year.
The baseline of 100 was set in the second quarter of 2015 as the Lowe survey program launched. A peak reading of 126 was reached in the third quarter of 2016. The index for the third quarter of 2020 was more than 100 points lower than that peak, a magnitude of decline unimaginable when the survey premiered.
“These readings are really down in the dumps,” said survey author Cameron Shelton, who is also director of the Lowe Institute of Political Economy and associate professor of political economy at Claremont McKenna College.
The overall sentiment reading, comprised of responses to seven questions, rose to 61.6 from 60.7. Shelton said the most surprising aspect of this quarter’s survey is how unevenly the recovery is playing out among different income groups.
“The three income groups — low, middle and high — are moving in dramatically different directions, essentially creating what I would call a three-track recovery,” he said.
For those respondents who last year made more than $75,000, the sentiment index of current and future business conditions both locally and nationally barely budged during the third quarter, rising to 60.9 from 60.8.
Many higher-income workers have jobs that have more easily transferred to a work-from-home environment using the internet, allowing them to keep their jobs at roughly the same income level.
“The fact that this number has held steady suggests the lack of new economic stresses is allowing this group to, for now, adjust to the ‘new normal,’” Shelton said.
The segment of respondents with 2019 incomes between $25,000 and $75,000 — what Shelton describes as “middle-income,” points to an incomplete “V-shaped” recovery.
He said the sentiment for this group plunged sharply during the second quarter as many faced layoffs. But Shelton said many in this segment have had their jobs reinstated, contributing to a rise in the third quarter to 66.7 from 60.1 in the second quarter. That’s still well below pre-pandemic sentiment levels for this group, he said.
“These results seem to track the return of work as partial reopening was allowed, and businesses discovered new ways to reach customers,” Shelton said.
Then there is the lower income segment, with 2019 income below $25,000 — workers earning minimum wage or slightly above. Many of these Angelenos work in industries that have struggled to reopen, such as restaurants and entertainment venues, Shelton said. The sentiment reading for this group fell to 60.3 from 71.2, a drop of 15%.
“Sustained income loss has tipped more respondents in this segment into acute financial distress,” he said.
One other surprise from the survey for Shelton was the rise in sentiment among self-employed respondents. The overall index reading of current and future business conditions among the self-employed rose to 61.2 from 45.8, an increase of nearly 34%.
Shelton said this huge increase was likely due to a combination of factors. Some self-employed may have seen work come back as sectors of the economy reopened during the third quarter. Others may have received the first unemployment insurance benefits for the self-employed under the Pandemic Unemployment Assistance program.
But those PUA benefits have expired, so unless Congress appropriates more money as part of a new stimulus package, Shelton said it’s likely the self-employed index reading will fall next quarter.
As for the fourth-quarter sentiment readings, Shelton said, much will depend on the outcome of the presidential election.
“The degree of political impact on sentiment for Angelenos has in the past been quite outsized,” he said.
“It’s not unreasonable to assume that if (former Vice President Joe) Biden wins, the index will rise substantially,” Shelton added.
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