Tough to say. But people do seem more optimistic than the fundamentals would justify. Robert Shiller has the details in an interesting column today:
The University of Michigan Surveys of Consumers have included in their regular measurements this specific question about fear of a prolonged depression:
“Looking ahead, which would you say is more likely — that in the country as a whole we’ll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?”
The Michigan surveyors produce a confidence score from the answer to this question. (It is one of the five ingredients in their combined Index of Consumer Sentiment, which is much more widely followed.) A high score on the question means that the answers tilted toward continuous good times, with a low score tilting toward unemployment or depression. Since 1960, the average score has been 94.
If we define a depression scare as any time the score is below 65, there have been four such scares since 1951. They were in the periods from 1974 to 1975, during which 47 was the lowest score; from 1978 to 1982, with a low of 41; from 1990 to 1992, with a low of 54; and from 2008 to 2009, with a low (to date) of 59. Note that so far, at least, the worst reading in the current scare has not been as bad as those of the previous episodes.
Shiller runs through a couple explanations for why people aren't as depressed today as they've been in previous slumps. I'd guess Obama's perceived competence has a decent amount to do with it, based on his approval rating and the steady rise since Election Day in the number of people who think we're on the right track.
Whatever the reason, it can certainly shorten the recession if people feel better and start consuming again (and the first quarter numbers suggest they have).
--Noam Scheiber