Consumer Confidence Decline Surprises
Only the Bush Administration
August 6, 2005
By Gene C. Gerard
new survey released last week shows that Americans are increasingly
worried about the economy. The Consumer Confidence Index declined
by three percent in July. Economists monitor the index closely because
consumer spending accounts for two-thirds of all economic activity
in America. The Conference Board survey determined that more consumers
expect the economy to worsen over the course of the next six months.
The number of people expecting fewer jobs to be created in the next
few months increased, while those expecting their personal incomes
to increase declined.
Americans who believe that business conditions are “bad” increased
according to the survey, as did those who responded that jobs are
“hard to get.” Consumers who expect business conditions to improve
declined in July, while those anticipating business conditions to
worsen increased. The Bush administration responded to the decline
in consumer confidence by fawning surprise. However, it’s hard to
believe that anyone else was caught off guard.
On July 19, computer manufacturer Hewlett-Packard announced that
it would layoff 14,500 workers in the next 18 months. Two days later,
Kodak announced it would layoff 10,000 workers over the next two
years, 7,000 of which will be in manufacturing jobs. The following
day, Kimberly-Clark, the maker of Kleenex tissues, Huggies diapers,
and Scott paper products announced it would cut 6,000 jobs and close
or sell 20 manufacturing plants by 2008. For each of these companies,
declining profits spurred the layoffs.
The labor market continues to be a source of anxiety for many Americans.
Although President Bush maintains, “the economy has turned the corner,”
few workers feel the same. Last month, the Bush administration reported
that 146,000 new jobs were created, pushing the unemployment rate
down to five percent, its lowest point in four years. While all
job growth is good, this was the ninth month in the last year that
the number of jobs created was less than predicted by economists.
The new jobs reported in July were 49,000 less than predicted. William
Cheney, chief financial economist at John Hancock Financial Services,
characterized the labor market as, “…kind of anemic compared with
what we were expecting.”
Long-term unemployment continues to be a significant problem. Based
on the report released last month, 17 percent of those unemployed
had been without a job for six months or more. According to a study
by the Economic Policy Institute, this is unusually high following
a recession. Historically, with an unemployment rate at five percent,
only 10 percent have been unemployed for more than six months.
While the unemployment figure is an important indicator of the
economy, another figure, which the Bush administration does not
report on, is perhaps even more important. That’s the number of
jobs cut. Fortunately, the private employment firm Challenger, Gray
& Christmas does report monthly on the number of jobs eliminated.
Their report released last month found that employers cut 110,996
jobs. This was a 35 percent increase over the prior month, and it
brought layoffs up to their highest level since January of 2004.
Between January and June of this year, 538,274 jobs have been cut.
This is a 14 percent increase over the same period last year. Last
month’s report by Challenger revealed that the auto industry cut
45,378 jobs. This was the fourth month in a row that manufacturers
cut jobs. In fact, job losses in manufacturing have occurred in
all but two of the last twelve months. The retail industry eliminated
24,065 jobs. The Challenger report predicted, “The pace of job cutting
in the second half of 2005 is expected to stay ahead of last year,
as employers continue to close facilities and consolidate in order
to achieve maximum efficiency.”
Earlier this summer, the staffing firm Manpower surveyed 16,000
companies to determine their hiring expectations for the upcoming
third quarter. Fifty-seven percent of the companies responded that
they expect their hiring numbers to stay the same, a decline of
two percent over this time last year. Six percent expect to decrease
the size of their work force. Only thirty-one percent plan to hire
more workers. The survey revealed that the employment picture for
the Midwest is particularly grim, as a majority of companies in
this region expect a downturn in hiring.
Since the recession in 2001, the return of full-time jobs has been
slow, at best. It took 40 months for the labor market to return
to its original level of full-time employment following the 2001
recession. Since July of last year, full-time employment has only
grown by 2.4 percent. This recovery has been slower, and more meager,
than in any recession during the last 25 years, according to the
Economic Policy Institute
Following the economic downturn in 1981, it took 27 months for
full-time employment to return to its pre-recessionary level. After
the recession of 1990, it took 34 months for the labor market to
return to its previous full-time employment level. And fewer additional
full-time jobs have been created after this recession than the previous
two. At this point following the recessions, full-time employment
was 7.1 percent (1980s), 4.2 percent (1990s), and 2.4 percent (2000s)
higher than at the start of the recessions.
It’s difficult to find and keep a good job today. Given the condition
of the labor market, it makes sense that people have less confidence
in the economy. What doesn’t make sense is why this bewilders the
Gene C. Gerard taught history, religion, and ethics for 14 years
at a number of colleges in the Southwest and is a contributing author
to the forthcoming book Americans at War, by Greenwood Press.