Persistent fears about the job market give rise to pessimism in June, ending three months of steady improvement in The Conference Board’s Consumer Confidence Index.
The June measure fell to 49.3 from a revised 54.8 in May. Both components of the Index fell, with the Present Situation Index declining to 24.8 from 29.7 and the Expectations Index decreasing to 65.5 from 71.5. Until last month’s decline, reported Tuesday, the overall index and the Expectations Index had been up every month since March, while the Present Situation had risen since April.
Still, the number for June was higher than any month in the past year, with the exception of May.
The equity markets followed the Consumer Confidence numbers on Tuesday, the last day of the second quarter, as the S&P Retail Index fell 2.36 points, or 0.7 percent, to 322.55 while the Dow Jones Industrial Average declined 82.38 points, or 1 percent, to 8,447. (For more information on the performance of stocks in the second quarter, see page 14.)
“The decline in the Present Situation Index, caused by a less favorable assessment of business conditions and employment, continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak,” said Lynn Franco, director of the The Conference Board Consumer Research Center. “Looking ahead, Expectations continue to suggest less negative conditions in the months ahead, as opposed to strong growth.”
Fears about the effects of rising gasoline prices also revived in June, taking many consumers back to the early part of 2008, before credit markets were upended and the full fury of the recession became known. Maury Harris, an economist at UBS, said that, in addition to weaker labor market conditions relative to May, “consumers have also experienced a sharp rise in gasoline prices. Retail gasoline prices averaged $2.71 per gallon during the survey period (June 1 to June 23), up from $2.29, on average, during the May survey period (May 1 to May 19).”
Jeffrey B. Edelman, director of retail consumer advisory services at RSM McGladrey Inc. and a former retail analyst, commented, “The confidence data is reflective of current news events.…I’ve often thought of consumer confidence as always more of a coincident indicator, where news events will alter consumer confidence when they answer these surveys. I think the bigger guide for consumer spending is employment. Once job declines start to subside, the negative impact on spending will lessen.”
However, with unemployment at a 26-year high of 9.4 percent and expected to go higher, the effects of job anxiety could linger.
Jewelry designer Steven Lagos said, “It is a hard time of the year to read the market as we’re right in the middle of the slow period. I think business in general has stabilized, but I don’t see it picking up a lot — just creeping up a bit.”
Lagos said his business is in a “good zone” right now, given what people are now willing to spend. “There are factors playing into our lap. Customers who exited out of our [average] $300-to-$700 price range to trade up two years ago we now see coming back,” the designer said.
In the June confidence survey, those who said business conditions are “good” slid to 8 percent from 8.8 percent in May, while those who said conditions are “bad” inched up to 45.6 percent from 44.5 percent.
Those who said jobs are “hard to get” gained almost a full percentage point to 44.8 percent from 43.9 percent.
Optimism, which had widened the gap between the Expectations and Present Situations indices in recent months, was more constrained. Consumers saying conditions will improve over the next six months fell to 21.2 percent from 22.5 percent. Those who expect conditions to worsen rose to 20.2 percent from 18 percent.
On the question of job creation, pessimism was more pronounced. Those expecting fewer jobs in the months ahead jumped to 27.3 percent from 25.6 percent last month; those expecting more shrank to 17.4 percent from 19.3 percent.
The drop in the Dow came from both reaction to the Consumer Confidence numbers and apprehension about the troubled housing sector. The Treasury Department said the number of homeowners two months behind in payment or in foreclosure rose in the first quarter from the previous quarter.