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Employment Outlook Dampens Consumer Confidence

The mood of consumers suddenly soured this month.

The Conference Board Consumer Confidence Index, which had increased in January, declined sharply in February.  The Index now stands at 46, down from 56.5 in January. The Present Situation Index decreased to 19.4 from 25.2. The Expectations Index declined to 63.8 from 77.3 last month.  That could be bad news for the recovery.

"This combination of earnings and job anxieties is likely to continue to curb spending," said Lynn Franco, director of The Conference Board Consumer Research Center.

Consumers' assessment of current-day conditions dropped in February. Those claiming conditions are "good" decreased to 6.2 percent from 8.5 percent, while those claiming business conditions are "bad" increased to 46.3 percent from 44.7 percent. Consumers' assessment of the labor market was also more pessimistic. Those saying jobs are "hard to get" rose to 47.7 percent from 46.5 percent, while those saying jobs are "plentiful" decreased to 3.6 percent from 4.4 percent.

Regarding the outlook for the labor market, the percentage of consumers expecting fewer jobs increased to 24.6 percent from 18.9 percent. Those anticipating more jobs will become available in the months ahead declined to 13.4 percent from 15.8 percent. The proportion of consumers anticipating an increase in their incomes declined to 9.5 percent from 11 percent.

Some economists view consumer confidence as a lagging indicator, but these concerns seem warranted.

The Bureau of Labor Statistics reported that employers laid off 182,261 workers, as measured by new filings for unemployment insurance benefits during the month.  There were 1,761 lay offs in the month, each involving at least 50 workers.  That was the first increase in mass lay offs since August 2009 and the first increase in initial claims since September 2009.  The biggest number of lay offs was in the temporary help sector.