Consumer Troubles Grow

June 9, 2010

US consumers are facing increased financial difficulties and a soured employment picture, according to the June 2010 Consumer Reports Index.

Trouble Tracker Shoots Up
The Consumer Reports Trouble Tracker Index continued a yo-yo pattern, dramatically increasing in June 2010 after significantly falling in May 2010 and skyrocketing in April 2010. The Index rose to 63.5 from 53 in May. The biggest increase is in missed mortgage payments, which reached 3.9%, its highest level since tracking began in April 2009, and is up significantly from May (2.5%).

Other financial difficulties also buffeted consumers. In June, more consumers reported difficulty affording medical bills or medications versus the prior month (16.4%), up 2.7 percentage points from the previous month, and they faced lost or reduced healthcare coverage (9.3%), up 1.5 percentage points.

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.

Employment Index Drops Despite New Job Starts
Following two months of growth which brought it into positive territory for the first time since May 2009, the Consumer Reports Employment Index fell from 50.6 to 49.4, signifying a contraction in the job market (a score of 50 or higher means the job market is expanding).

The decline was led by the proportion of Americans that lost their jobs in the past 30 days (8.6%), reaching its highest level since the inception of the Consumer Reports Index in April 2009. Job losses in June were up significantly from the prior month (4.9%). But despite the high job losses posted in June, 7.4% of Americans reported starting a job in the past 30 days, well above May (6%), with this statistic achieving its highest level recorded since April 2009.

The official U.S. unemployment rate fell from 9.9% to 9.7% in May 2010, according to the Bureau of Labor Statistics. However, 411,000 of 431,000 new non-farm payroll jobs created during the month were temporary jobs related to the 2010 Census, suggesting there is currently little activity in developing long-term employment.

Consumers Scale Back Shopping Plans
Not surprisingly considering a general increase in financial and employment difficulties, consumers have scaled back their interest in shopping. The Consumer Reports Past 30-Day Retail Index for June, reflective of May activity, is 10.8, virtually unchanged from the prior month (10.9). May’s Next 30-Day Retail Index, reflective of planned purchases for June, is at 8.5, down slightly from 9 the prior month. Per capita spending for the index categories in the past 30 days was $234, down slightly from May ($248).

The May 2010 Conference Board Consumer Confidence Index paints a different picture of how consumers view their economic prospects this year. The Consumer Confidence Index climbed for the third straight month in May 2010, rising substantially from a revised score of 57.7 to 63.3. Significant growth in the future-looking Expectations Index was the main driver for the overall Index.

The Expectations Index hit a recent high of 85.3 in May 2010, up significantly from the previous recent high of 77.4 in April 2010. The highest Expectations Index score before the current recession started in December 2007 was 89.2 in August 2007.

Older Consumers More Pessimistic
The Consumer Sentiment Index is virtually unchanged from the prior month, 45 as compared to 44.6, respectively. Sentiment is up from its recent low in September 2009, but is down compared to a year ago (48.5). The most optimistic consumers are between the ages of 18-34 (52.3), and with a household income of $100,000 or more (54.9). The most pessimistic are households with an income less than $50,000 (39.2) and Americans 65 or older (41.7).


The Consumer Reports 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.

Stress Index Drops Slightly
Interestingly, According to the Consumer Reports Stress Index, the level of stress consumers feel they are under (57.6) is down slightly compared to both the prior month (59.6), and is almost unchanged from one year ago (57).

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 report comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. It is conducted by the Consumer Reports National Research Center and 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 (1,003 households, 250 cell phones) among adults aged 18 and older. Interviewing took place between May 20-23, 2010.


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