By almost all accounts, the American economy is humming along nicely. Second-quarter GDP growth reached 4.2 percent, higher than it has been in almost seven years. Consumer spending growth, which makes up roughly 70 percent of GDP, was strong as well at 4.0 percent in the second quarter 2018.
The stock market remains vibrant, with the S&P 500 reaching several new all-time highs in August and September, even in the face of the tariffs imposed on China, Canada, the EU and other countries by the Trump administration.
{mosads}What may be lost in the political arena is that these economic tailwinds are driven primarily by people being satisfied as customers. But being a customer and being satisfied is much different than being a voter and being satisfied. This is where satisfaction intermingles with economics and politics.
According to the American Customer Satisfaction Index (ACSI), which has tracked company, industry and national-level customer satisfaction since 1994, consumers are only a fraction of a point less satisfied today (on a 100-point scale) than they have ever been with their purchases.
Today, the National ACSI score is 76.7, peaking at 77.0 in the first quarter of 2017. It has ranged from 70.7 to 77.0 during the last 25 years.
Not surprisingly, the strong economy has produced an all-important — both economically and politically — drop in the unemployment rate.
The unemployment rate was steady at 3.9 percent in August, where it has roughly been during all of 2018 (ranging this year from a low of 3.8 percent in May to 4.1 percent earlier in the year). These rates are the lowest since they hit a similar range in the latter part of 2000.
Such low rates result in more spending, generally satisfied customers but also a much tighter labor market. This tighter labor market has resulted in many Americans seeking new, better positions than ever before.
In July, almost 3.6 million people quit their jobs, a record-high number, and most of these “quitters” undoubtedly did so because they already have or think they can easily find better pay at more prestigious positions.
This is where things get tricky and less positive. The intersection of customer satisfaction with macroeconomics and politics has potential bullwhip effects.
When the unemployment rate dips and many workers switch jobs, data from the American Customer Satisfaction Index show that the effect can be a negative to customer service, customer satisfaction and to economic growth.
Since many lower-paying and perhaps less-prestigious jobs are customer-facing (e.g., retail, restaurants, call centers), many of the job-quitters are coming from these positions. They will typically be replaced by new employees with less experience and less job-specific training to offer strong service to customers.
Based on the pattern in millions of data points in the ACSI data, low unemployment rates and job switching result in eroding customer service for many companies across many industries.
If customer service erodes enough, the consequence is also a dip in customer satisfaction. This often causes consumers to hold on to their wallets more tightly, slowing down the pace of economic growth.
When will this happen? The satisfaction-unemployment dynamics is likely to result in a slowdown in the economy in the latter parts of 2018. Of course, angry consumers are not what the Trump White House, policymakers or companies hope to see for the balance of this year.
After all, midterm elections are approaching, and the critical holiday shopping season is on the horizon.
On the positive side, some of the historical negative effects of low unemployment on customer service and satisfaction could be alleviated by the new economy we live in today. Dramatic improvements in some training programs and automation in various industries have helped certain customer-facing positions.
So, advanced companies can soften the blow of the glut of new, inexperienced employees across the economy.
But, if the past is indeed prolog, the American economy may find itself with a bevy of less-happy, irritable and frustrated consumers — and voters — over the next few months.
Forrest Morgeson is director of research at the American Customer Satisfaction Index (ACSI). He is also clinical professor in the Broad College of Business at Michigan State University.
Tomas Hult is professor in the Broad College of Business at Michigan State University and executive director of the Academy of International Business. In 2016, Hult was selected as the Academy of Marketing Science Distinguished Marketing Educator, as the top marketing professor worldwide for scholarly career achievements.