America’s consumers -- aware of the bad economic stats and suffering from high rates of unemployment -- are not feeling confident. From the Conference Board’s
America’s consumers — aware of the bad economic stats and suffering from high rates of unemployment — are not feeling confident. From the Conference Board’s report on its closely watched consumer confidence index:
[The index], which had been on the rise for three consecutive months, declined sharply in June. The Index now stands at 52.9 (1985=100), down from 62.7 in May. The Present Situation Index [which measures how consumers feel about their current financial state] decreased to 25.5 from 29.8. The Expectations Index [which measures where consumers feel things are headed] declined to 71.2 from 84.6 last month. [...]
Consumers’ appraisal of present-day conditions was less favorable in June. Those saying conditions are “good” decreased to 8.0 percent from 9.7 percent, while those saying business conditions are “bad” increased to 42.4 percent from 39.5 percent. Consumers’ assessment of the labor market was also less favorable. Those claiming jobs are “hard to get” increased to 44.8 percent from 43.9 percent, while those saying jobs are “plentiful” decreased to 4.3 percent from 4.6 percent.
Economists had expected the index to have fallen to 62 in June, according to estimates by CNN.
“Consumer confidence, which had posted three consecutive monthly gains and appeared to be gaining some traction, retreated sharply in June,” Lynn Franco, the director of the Conference Board, said in a statement. “Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence. Until the pace of job growth picks up, consumer confidence is not likely to pick up.”
The issue here is not just that regular folks are feeling financially stressed. It is that prophecies like this tend to be self-fulfilling. If you are concerned that the economy is not getting any better, you might consider saving more of your salary in case you are laid off. That means you are not spending that money, which hurts businesses, which makes them hire fewer workers, which means you hear about more bad jobs reports, which in turn makes you more worried. It is a vicious cycle. A few strong jobs numbers could do a lot to improve confidence. But, unfortunately, few economists expect a bolstered labor market recovery anytime soon. If anything, they believe unemployment will edge down slowly over the course of the next few years.
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