NEW YORK — Americans will start the long weekend grateful for an improved job market.
This story first appeared in the November 26, 2003 issue of WWD. Subscribe Today.
The Conference Board’s Consumer Confidence Index, based on a monthly survey of 5,000 households, rose a better-than-expected 10 points to 91.7 this month, its best mark since September 2002’s 93.7, from an upwardly revised 81.7 in October. Wall Street analysts had forecast a rise to 85.
“Consumers have been waiting for the labor market to turn around and now we are seeing the data supporting that the turnaround is actually here,” Jessica Walker, an economist with Moody’s Investors Services, said.
In a one-two punch that failed to substantially move the equity markets Tuesday, the positive news from the Conference Board coincided with word that gross domestic product grew at an annual rate of 8.2 percent during the third quarter, the biggest GDP upswing in 19 years.
While both halves of the confidence index gained, the Present Situation component, which takes into account consumers’ current views, was the primary driver of the overall gains for the second straight month. That part of the index rose 13.1 points to 80.1 in November from 67 in October. The Expectations portion, which assesses consumer attitudes for the next six months, advanced 7.9 points to 99.4 from 91.5.
“The improvement in the Present Situation Index, especially in the jobs component, suggests that consumers believe a slow but sure labor market turnaround is under way,” Lynn Franco, director of the board’s Consumer Research Center, said. “The rise in expectations is a signal that consumers will end this year much more upbeat than when the year began.”
Diane Swonk, an economist with Bank One Corp., said, “There is a consistent message that consumers are feeling the labor market is improving.”
However, the brighter mood does not necessarily translate to strong spending over the holiday season, Swonk said. She explained the news for retailers is more mixed as retailers in resort areas as well as high-end firms should do better than the rest of the industry, including departments stores, which she said will still be “thrashing” it out. She reasoned that this holiday season consumers have been more willing to spend on discretionary items, like vacations, and the recent increases in the equity markets and the expected bonuses on Wall Street should parlay into luxury purchases.
“The economy and the improving job market gives us some hope the employment situation is in fact improving and is more than just stabilizing,” Swonk said. “I think there really is some momentum out there and we are going to see some really good November employment data.”
Moody’s Walker recounted there were 286,000 jobs added between August and October, and the unemployment rate fell to 6 percent in October, down from its high of 6.4 percent in June.
Those saying jobs currently are “hard to get” declined to 29.5 percent this month from 33.7 percent, and those describing employment opportunities are abundant increased to 13.2 percent from 11.8 percent. Those rating current business conditions as “good” increased to 19.9 percent from 17.1 percent. Those claiming conditions were “bad” fell to 24 percent from 28.1 percent.
Consumers’ short-term outlooks continued to improve. Consumers expecting business conditions to pick up over the next six months rose to 24.1 percent from 23.5 percent. Consumers expecting the opposite declined to 7.1 percent from 11 percent.
The improvement notwithstanding, the employment outlook remains mixed. Those anticipating more jobs to become available in the next six months declined to 18.2 percent from 19.6 percent. Those expecting fewer jobs to become available, however, decreased to 17.6 percent from 20.4 percent. The proportion of consumers anticipating an increase in their incomes rose to 19 percent from 16.9 percent.