Job Prospects Brighten Consumer Outlook
NATIONAL REPORT -- Even with the current national unemployment rate at 9.2 percent and reports of recent mass job layoffs at several high-profile companies, including bankrupt book retailer Borders, consumer confidence increased in July due to a more optimistic outlook on future job prospects.
Consumer confidence had taken a beating over the previous two months, mostly due to dismal news on the consumer side of the economy.
Chris G. Christopher, Jr., senior principal economist at IHS Global Insight, called this latest consumer confidence report welcome news, even if things still are not very bright on the consumer side of the economy.
Christopher noted that the unemployment rate stands at 9.2 percent and the past couple of employment reports were dismal. Household income growth is slowing down. The poor state of affairs in the housing market and the volatility in the stock market are pushing down household net worth.
Gasoline prices started declining in June, but are on the rise again in July. Food prices are still increasing, but at a considerably slower pace. And core price inflation (inflation excluding food and energy prices) is increasing. In addition, the recent bickering in Washington D.C., over the debt ceiling is a negative thing for consumer optimism. All this is bad news, after bad news, after bad news, according to the economist.
"Going forward, there needs to be substantial employment gains in order for consumer mood and spending to improve," said Christopher. "Personal spending adjusted for inflation fell in May and April -- this is extremely troubling since personal spending represents 70 percent of GDP. Someone's spending is another person's income and employment. While the increase in consumer confidence is good news, the American consumer faces many headwinds."