‘Jobless Recovery’ Hurts Consumer Confidence
An unexpected decline in future expectations caused a key monthly measure of consumer confidence to dip in September. The component tracking present conditions fared even worse, but that was expected due to the struggling labor market.
The Conference Board’s Consumer Confidence index dropped to 53.1 in September, falling from 54.5 in August and defying expectations that it would climb to 57.0.
The Present Situation Index fell to 22.7 from 25.4 due to the creeping unemployment rate, which is expected to reach 9.8% in this Friday’s employment report. The decline in the Expectations Index is less dramatic, yet more important, as forecasters had assumed consumer sentiment was rising alongside the soaring stock market. Instead, 6-month expectations fell half a point to 73.3.
“While not as pessimistic as earlier this year, consumers remain quite apprehensive about the short-term outlook and their incomes,” said Lynn Franco from the Conference Board.
Of the 5,000 people surveyed, 46.3% said business conditions remain “bad,” while only 8.7% said conditions were “good.” In the labor market, nearly half (47.0%) said jobs were “hard to get,” while a record low 3.4% said jobs were “plentiful.” Looking ahead, only 17.9% expect to see more jobs by the end of Q1 2010, while 23.1% continue to expect fewer jobs.
“The failure for the job market to show more convincing improvement appears to be discouraging planning spending on big ticket items as fewer respondents in September say they plan to buy a car, home, or major appliance in the next six months,” said analysts from Nomura Global Economics. “This sort of caution underscores the downside risks to most forecast, which presume continuing growth in consumer spending albeit at relatively slow rates.”
A broad gauge of the short-term outlook was also pessimistic. Those anticipating an improvement in business conditions over the next six months actually fell to 21.3% this month, and 15% expect conditions to worsen.
“Confidence may languish until the jobs market is closer to a turnaround,” said economists at RDQ, who compared the data to the “jobless recoveries” in 1991-1992 and 2002-2003.
“In both cases, confidence rose in the early stages of economic recovery only to fall back to make new lows as jobs continued to decline,” they said.
Overall, the report points more to a rough stabilization and less to a sustained recovery.
Franco added, “With the holiday season quickly approaching, this is not very encouraging news.”
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