Despite increases in August and only slight decreases in September, both components of the Index - Present Situation Index and the Expectations Index - fell this month by several percentage points, reports Retailer Daily.
Brief highlights from each index follow.
Present Situation Index
The Present Situation Index decreased from 23 in September to 20.7 in October, hitting its lowest reading since February 1983. The percentage of consumers rating current business conditions as “bad” increased from 46.3% to 47.1%, while the percentage rating current business conditions as “good” decreased from 8.6% to 7.7%. Last month, the percentage of consumers rating current business conditions as “good” was up slightly.
Meanwhile, the percentage of consumers saying jobs are currently “hard to get” increased from 47% to 49.6%, while those claiming jobs are “plentiful” decreased from 3.6% to 3.4%.
Last month, the Expectations Index, which tracks consumer confidence in the direction of the economy and labor market in the next six months, decreased by less than one percentage point. This month, it dropped eight percentage points, from 73.7 to 65.7.
The percentage of consumers anticipating an improvement in business conditions during the next six months decreased from 21.3% to 20.8%, while the percentage expecting conditions to worsen jumped from 14.6% to 18.3%. Last month, the percentage expecting conditions to worsen slightly decreased.
The labor market outlook, which remained virtually flat in September, dropped in October. The percentage of consumers expecting more jobs in the next six months declined from 18% to 16.3%, while the percentage expecting fewer jobs increased from 22.9% to 26.6%. The proportion of consumers expecting an increase in their incomes, which increased slightly last month, dipped this month from 11.2% to 10.3%.
Lynn Franco, director of the Conference Board Consumer Research Center, said labor conditions play a major role in increasing consumer pessimism and reiterated last month’s warning to retailers about the upcoming holiday shopping season.
“Consumers remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays,” said Franco.
Recent news on the availability of jobs in the US has been decidedly negative. September unemployment data from the US Bureau of Labor Statistics showed that a significant portion of working-age US adults remain unemployed or only employed part-time. The official unemployment rate crept up from 9.7% to 9.8%, and declines in the civilian labor force participation rate, which now stands at 65.2%, and employment-population ratio, which now stands at 58.8%, demonstrate that the actual percentage of unemployed adults is much higher.
Broken down by state, BLS statistics show jobless rates have increased in all 50 states and the District of Columbia since September 2008. On a monthly basis, unemployment rates have grown in 23 states and the District of Columbia, decreased in 19 states, and remained flat in eight others. Ten states and the District of Columbia reported jobless rates of at least 10% in September, with Michigan continuing to have the highest unemployment rate among the states at 15.3%.
In contrast, the Conference Board’s own Employment Trends Index (ETI) recorded its first rise since January 2008, with a 0.3% improvement in September 2009, signifying more jobs. The Conference Board predicts the trend of declining job losses will continue, but there will be no quick end to the recession.
About the study: The monthly Consumer Confidence Survey is based on a representative sample of 5,000 US households and is conducted for The Conference Board by TNS. The cutoff date for October’s preliminary results was October 21, 2009.