Back Into the Future With Consumer Confidence

[marmar]

from 24/7WallStreet:



Back Into the Future With Consumer Confidence
Posted: February 24, 2010 at 3:54 am


Consumer confidence as measured by the Conference Board fell sharply this month. The “Present Situation” index fell to a 27-year low at 19.4 points because of the troubled job market and general business conditions. The figure was last below that in February 1983.

The figures sent the market down, as well they should have. Most of the Conference Board February numbers moved back to where they were at the depth of the recession, or even lower to the depths of the only other recession since the 1930s when unemployment was above 10%. The jobless numbers were in double digits for the ten months from September 1982 to June 1983. Unemployment was above 8% for 27 consecutive months.


Former Federal Reserve Chairman, Alan Greenspan, told the Credit Union National Association’s Governmental Affairs Conference that the recession that just ended was over primarily because high-income consumers and large businesses benefited by the sharp improvement in the stock market. He described it as an “extremely unbalanced recovery” which remains encumbered by problems, particularly banks tightening credit for small businesses and consumers. This in turn has slowed the housing and auto markets.

What Greenspan said would not lead anyone to think that he believes the economic situation is about to improve sharply. He made a point of cutting the effects of the recovery into two pieces—the “haves” and the “have-nots”. There is no bright horizon for the average citizen who lives with a mortgage worth much more than his home and the concern that he may be out of a job soon. A new Gallup poll showed that 61% of people who are unemployed are not hopeful about finding work in the next four weeks. That makes sense. Too many people are chronically unemployed because so much of the American manufacturing base was destroyed over the last decade, much of it before the recession began, and will not be built back—ever. Wall St. executives may have made as much in 2009 as they did in 2007, but no one else did, and a lot of people are making less.

Small businesses are not hiring and they will not, so long as a threat looms that the economic recovery will stall if the economy has really improved at all. That is the “disconnect” between mainstream economists and normal working people. The person who makes $50,000 a year and has a family member who has no job and a neighbor who has no job cannot understand why a person in Washington with a PhD in economics from Harvard would say that the economy has improved.

People who live outside of Washington or on streets other than Wall St. realize that the great stimulus investment made in the US and many of the other large economies around the world is a crutch that has allowed the bank system to recover and big companies to get back into the market to raise money. The US government has “bought” some jobs, perhaps several hundred thousand or a million through its stimulus programs. It is not the number of over three million that the President hoped for, but there is another jobs bill which will probably be approved by Congress this month. This new one will provide tax breaks for companies that hire people, highway construction funds, and access to capital for small businesses.

What the Congress cannot legislate is a return of any confidence among consumers and small businesses. Too few people are willing to say to themselves or the people they know that they are optimistic about their economic futures. Some businesses will take the tax breaks. Some new highways will be built. But, a year from now many of the people who are hired today will be out of work again. The government will have given its tax break for a year. The second year will be the problem, if businesses believe that there is not enough economic activity to maintain payrolls without government help.

Many of the people in the workforce today do not remember 1983. Those who do are well over forty. And, the mind has a way or erasing bad memories so the last really deep recession is an old wound for those who were wounded by it at all. This new recession began in 2007 and continued until late last year, although for many it is still a recession. This one will be remembered for decades, not just because of its depth but also because it never seemed to end.

-- Douglas A. McIntyre


http://247wallst.com/2010/02/24/back-into-the-future-with-consumer-confidence/#more-60673

[AllentownJake]

1. Double Dip nt.

[ixion]

2. It'll be interesting to see how many years this goes on before they call it was it is:

a depression. As long as the 'R' word is being floating around, we won't be making any progress. We're refusing to accept the reality of the situation, and do what's necessary to correct it.

[AllentownJake]

3. Once they call it a depression it requires fundamental action

There is a PR war with the leaders vs. the population and right now the leaders can deny reality only for so much longer, they do so out their own peril.

Running around saying you stopped a depression after 3 months of good news is about the dumbest thing politically you can do.

[Craftsman]

7. Last month my wife's school district wanted 1 IT tech

It was only for 10 months a year, the other 2 they try to find soemthing but you may be out of work, it paid $19 an hour with benies. They had 350 applicants. But the US is still importing tech workers on H1B visas.

[AllentownJake]

8. Yes that is ridiculous

You don't bring in new people when you can't take care of your own.

[Craftsman]

9. The sad ruth we need to get rid of many of the immigrant workers

so Americans can have their jobs. Yes some of teh jobs pay low but if there are shortages of workers wages go up adn more then once in my life I took a low wage crap job until something better came because it was the only job I could get.

[AllentownJake]

10. Well if someone is here illegally

They are not being paid on the books. So they are not paying taxes, they are not subject to our labor laws, and they send the money home.

Yes Illegal immigration is a huge problem, one neither party has any intention of having an honest discussion about or doing anything about.

[Craftsman]

12. I am talking about legal and illegal

I would crack down on those that hire illegals and revoke many work visas. But as you say neither party will do this. And the fact that neither party is willing to do this and other thing helpful to the middle and working classes are a huge part of our problems.

[proudohioan]

11. I agree.

IMO, the only reason that this is not as bad as the Great Depression are the social safety nets that we have in place now. But I wonder how long these will continue......folks receiving UI benefits are facing possible loss of those benefits, and I worry each and every month that the Food Stamp program will run out of money (currently, that's my only source of income).


I worry about money to fund our safety nets running out. How long can we continue to fund these crutches while ignoring the obvious mass job creation that must take place?

[AndyA]

4. New home sales are up, but existing home sales are down.

Consumer confidence is up, but retail sales are down.

Manufacturing is up, but unemployment is higher.

Home foreclosures are down, but credit card default is up.

New day, different set of statistics. In short: the economy still SUCKS. There are not enough new jobs being created to help. American companies are still being rewarded by our government for outsourcing, and that MUST STOP. They are still allowed tax breaks for taking business elsewhere.

ENOUGH IS ENOUGH! Even a 5th Grade economics student could understand what's going on. Until well paying jobs are created here in the United States, there WILL BE NO RECOVERY. :shrug:

[marmar]

5. That's what kills me about the "We're in a Recovery" Crowd.....

Much of the fantasy economic expansion of the 1990s was fueled by credit cards and using homes as ATMS - that's all over now. The real unemployment rate is somewhere around 20 percent. State and municipal budgets are on the verge of collapse. But somehow we're in the midst of this great recovery.
The human capacity for self-delusion is astounding.

[AllentownJake]

6. Yes it is quite astounding

I particularly enjoy the stimulus spending bullshit they are talking right now.

Most of the jobs were created in the public sector in States. The States are having massive budget problems and cannot support their existing workforce. These states are going to keep these jobs after they no longer have funding from the federal government at the end of the year when they are still dealing with declining tax revenue and structural deficits?