Consumer Situation Improves

May 11, 2010

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Analytics, Automated & MarTech | Data-driven | Financial Services | Pharma & Healthcare | Retail & E-Commerce | Staffing

Consumer employment, finances, spending and stress all show signs of improvement in May 2010, according to the Consumer Reports Index.

Employment Index Continues Positive Trend
The Employment Index, which examines the change in employment of those that reported starting a new job, compared to those that have lost their job or were laid off in the past 30 days, rose in May 2010 after entering positive territory the previous month for the first time since May 2009. The Employment Index now stands at 50.6 (with a score more than 50 representing positive job growth), compared to 50.4 in April 2010 and 48.7 in both March and February 2010.

In the past 30 days, 6% of Americans reported losing their job, compared to 5% in April 2010. The proportion of Americans who have lost their job in the past 30 days stands at 4.9%.

The 5% reporting starting a new job is up from 3.5% the prior month, but behind the recent high point in September 2009 (6.2%).

The official April 2010 Employment Situation Summary roughly corroborates the findings of the Employment Index. According to the Bureau of Labor Statistics, the U.S. unemployment rate rose to 9.9% in April 2010, but the economy added a healthy 290,000 non-farm payroll jobs.

Consumers Bid Troubles Adieu
Following its largest-ever monthly gain in April 2010, The Consumer Reports Trouble Tracker Index sharply declined in May 2010. The Trouble Tracker Index plummeted from 63.5 to 53, although it is still up from 48.5 in May 2009. Compared to the prior month, the decrease in the Trouble Tracker Index was driven by declines in inability to afford medical bills or medications (13.7%, down from 16.6%); increased credit card interest rates, penalties and fees (10.4%, down from 12.1%); missed payment on a major bill – not mortgage (8.7%, down from 12.5%); and lost or reduced healthcare coverage (7.9%, down from 9.3%).

The negative events followed by the Trouble Tracker include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest rate increase, penalties fees, reduced lines of credit or other changes in credit card terms, job loss or layoffs, reduced healthcare coverage, or the denial of personal loans. The index is calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index, multiplied by the average number of events encountered.

Consumers Loosen Purse Strings
The Consumer Reports Past 30-Day Retail Index for May 2010, which reflects the purchases consumers made in April 2010, is at 10.9, up from 10.4 in April 2010 (reflecting March purchases) but slightly down from 11.1 in March 2010 (representing February purchases) and flat compared to 10.9 in February 2010.

However, the Next 30-Day Retail Index, which reflects the purchases consumers plan to make in April 2010, is at 9, which up slightly from 8.3 the previous month and substantially better than 7.3 in March 2010. This indicates that confidence is emerging and real improvement in retail may materialize in the coming months.

The Conference Board Consumer Confidence Index also indicates consumers are ready to start engaging more with the economy. For the second straight month, the Consumer Confidence Index rose in April 2010, climbing from a revised score of 52.3 to 57.9. Although the Present Situation Index did improve, significant growth in the future-looking Expectations Index was the main driver for the overall Index.

Younger, Wealthier Consumers Drive Financial Sentiment Improvement
After remaining virtually flat at 43.7 the prior month, the Consumer Sentiment Index, which measures financial optimism, edged up in May 2010 to 44.6. Sentiment continues its gradual upward movement. The most optimistic consumers are between the ages of 18-34 (54.9), and with household income of $100,000 or more (54.2). The most pessimistic are households with an income of less than $50,000 (40.2) and Americans 65 or older (38.1).


Sentiment is up from a year ago versus today, but the overall gain has been modest, 41.6 compared to 43.7, respectively. The most optimistic consumers are 18-34 years of age (54.4), followed by those with household income of $100,000 or more (51.9). The most pessimistic were households with an income of less than $50,000 (40.8) and Americans 65 or older (35.8).

The Sentiment Index captures respondents’ attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. The Sentiment Index can vary from a high of 100 to a low of 0.

Consumers Release Stress
The Consumer Reports Stress Index was 59.6 in May 2010, down from both 63.8 in April 2010 and 62 in May 2009.

The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (Total Stress) to a low of 0 (No Stress).

About the Data: The Consumer Reports Index, conducted by the Consumer Reports National Research Center, is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,260 interviews were completed (1,009 households, 251 cell phones) among adults aged 18 and older. Interviewing took place between April 29 and May 2, 2010.


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