Slow Job Creation Stalls Consumer Activity

March 10, 2010

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Analytics, Automated & MarTech | Financial Services | Retail & E-Commerce | Staffing

Although the tide of job losses has been stemmed, the level of job creation needed to fuel a consumer recovery has not developed, according to the March 2010 Consumer Reports Index.

Employment Index Stays Flat
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, remained steady at a revised score of 48.7 in March 2010. In the past 30 days, 6% of Americans reported losing their job, compared to 5.7% in February 2010.

In recent months, the proportion of Americans starting a new job in the past 30 days has also dropped, declining to 3.5% in March 2010, compared to 3.8% in February 2010 and a recent high of 6.2% in September 2009. As a result, though the index remains unchanged, there is a deepening problem in getting the unemployed back to work.

The official February 2010 Employment Situation Summary roughly corroborates the findings of the Employment Index. According to the Bureau of Labor Statistics, the U.S. unemployment rate stayed flat at 9.7%, with the economy shedding 36,000 non-farm payroll jobs.

An Employment Index score below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30 days.

Spending Remains at Pre-holiday Levels
The Consumer Reports Past 30-Day Retail Index for March 2010, which reflects the purchases consumers made in February 2010, is at 11.1, virtually unchanged from 10.9 the prior month. This number stands firmly at pre-holiday levels, indicating that consumers are hesitant to do any spending in this uncertain job market. Of all the categories that comprise the Past 30-Day Retail Index, only spending on major appliances and personal electronics showed modest gains.

The Next 30-Day Retail Index, which reflects the purchases consumers plan to make in March, is at 7.3, which is below pre-holiday levels and marks the lowest levels tracked since August 2009 (7.5).

However, according to the Conference Board Leading Economic Index (LEI), which measures economic activity for the next six months, an economic recovery is underway. The LEI rose 0.3%, from a revised score of 107.1 to 107.4, in January 2010.

Financial Sentiments Edge Up
Following a slight decline in February 2010, the Consumer Sentiment Index, which measures financial optimism, edged up from 43.9 to 44.9, the highest point this year (January 2010’s score was 44.1).

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After declining from June-September 2009, and hitting a near-historic low of 38.1 in September, the Consumer Sentiment Index hit adjusted scores of 42.1 in October and 42.2 in November. For December, the Index showed incremental decline with a score of 41.8. The Index, which indicates financial optimism when it surpasses 50, reached a high of 48.5 in June 2009 and had been increasing on a monthly basis since hitting a low point of 37.8 in October 2008.

Troubles Trend Downward
The Consumer Reports Trouble Tracker has shown improvement over the past several months. This measure of financial difficulties faced by consumers declined to 52.3 in March 2010 from 53.4 in February 2010, continuing a downward trend from September 2009, when it stood at 68.7. The top issue faced by consumers in March was being unable to afford medical bills or medications (14.3%), unchanged from February. The other leading issue, negative changes in the terms of credit cards, continues to be an important component affecting consumers (10.1%), though it’s down from its November 2009 high of 15.1%.

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.

Stress Goes Down as Spring Approaches
As the stresses of the holiday season and winter weather began to fade with the approach of spring, the Consumer Reports Stress Index dropped in March 2010, from 59.9 to 57.7. This is a definite improvement from the score of 63 reached in December 2009 as consumers were busy with holiday planning and shopping.

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 1,258 interviews were completed (1,008 landline phones, 250 cell phones) among adults aged 18 and older between February 25-28, 2010.

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