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Consumer Reports Index: Slow job creation stalling economic recovery

Posted Sunday, March 21, 2010

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Yonkers, NY — Slow job creation continues to drag on the economy, according to the Consumer Reports Index for March. This month’s findings show that, although the tide of job losses has been stemmed, the level of job creation needed to fuel a consumer recovery has not developed.

Consumer Reports Employment Index stands at 48.7 for March, reflective of net job losses in the prior 30-days and on-par with February at 49.0. Over the past several months the proportion of Americans reporting losing their job in the past 30 days has been on a decline and is now stabilized at 6.0 percent versus 5.7 percent in February.

However, in recent months the proportion of Americans starting a new job in the past 30 days has also dropped, declining to 3.5 percent in February from a recent high of 6.2 percent in September. This may be an indicator that there is a deepening problem in getting the unemployed back to work. The expanding pool of unemployed and the effect this invariably has on the spending habits of the employed seriously restricts economic activity. Results indicate that labor conditions are poorest in the West, where the employment index dropped 1.2 percent.

The Consumer Reports Trouble Tracker Index has shown improvement over the past several months, falling to 52.3 in March from 53.4 in February, continuing a downward trend from September 2009 (68.7). The key financial difficulties faced by consumers this month continue to be the inability to afford medical bills or medications (14.3%), and credit card increased interest rates, penalty fees, etc. (10.1%). This month, the North Central region of the U.S. saw an uptick in financial difficulties to 50.0 up from 43.1 in February.

“Though we are seeing modest gains in consumer confidence, led by the Trouble Tracker, pointing to a decline in financial difficulties, without improvement to the employment picture consumers will be reluctant to engage in the recovery,” said Ed Farrell, a director of the Consumer Reports National Research Center. “Once we begin to see job creations, a return to a solid, sustainable retail growth will emerge, and the consumer recovery will be more attainable.”

The lack of engagement with the economy is reflected in Americans’ spending habits. The Consumer Reports Past 30-Day Retail Index for March, reflective of February activity, is at 11.1, virtually unchanged from the prior month (10.9). This number stands firmly at pre-holiday levels, indicating that consumers are once again hunkering down. The Next 30-Day Retail Index, reflective of planned purchases for March, at 7.3, is below pre-holiday levels and marks the lowest levels tracked since August 2009 (7.5). The softness in this index points to a hesitancy among consumers to commit to spending in this uncertain economy.

The Consumer Reports Index report, available at www.ConsumerReports.org, comprises five key indices: the Sentiment Index, the Trouble Tracker Index, Stress Index, the Retail Index, and the Employment Index. Here are the key findings:

Consumer Reports Sentiment Index: 44.8

  • Consumer Reports Sentiment Index remains unchanged from the prior month, 44.8 versus 43.9, respectively. Sentiment is up from a year ago versus today, but the overall gain has been modest, 41.9 versus 44.8, respectively. The most optimistic consumers are between the ages of 18-34 (54.8), household income of $100,000+ (50.9). The most pessimistic were households with an income of less than $50,000 (43.4) and Americans 65 or older (38.3).

The 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.

Consumer Reports Trouble Tracker Index: 52.3

  • The Consumer Reports Trouble Tracker Index addresses both the proportion of consumers that have faced difficulties as well as the number of hurdles they have encountered. This index has shown improvement over the past several months, falling to 52.3 in March from 53.4 in February, continuing a downward trend from September ‘09 (68.7).
  • The key financial difficulties faced by consumers this month included:
    • Unable to afford medical bills or medications (14.3%)
    • Credit card increased interest rate, penalty fees, etc. (10.1%)
    • Missed payment on a major bill – not mortgage (8.5%)
    • Lost or reduced healthcare coverage (6.3%)
    • Lost job (6.0%)

  • Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:
    • Unable to afford medical bills or medications (23.6%)
    • Missed a payment on a major bill (not mortgage) (10.6%)
    • Lost their job or were laid off (9.4%)
    • Lost or have reduced healthcare coverage (8.8%)
The Consumer Reports Trouble Tracker focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty 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 Consumer Reports Trouble Tracker Index is then 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.

Consumer Reports Retail Index: Past 30-Day – 11.1, Next 30-Day – 7.3

  • Consumer Reports Past 30-Day Retail Index for March, reflective of February activity, is at 11.1, on par with February (10.9). Troubling, though, is the fact that the Past 30-Day Retail Index now stands firmly at pre-holiday levels indicating that consumers are once again pulling back. This index was driven by purchasers of personal electronics (24.6%) up 1% pts., and major appliances (7.7%) up 1.4% pts.
  • Supporting the theory that consumers are once again pulling back, is the Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for March at 7.3, below pre-holiday levels and below the lowest levels since August 2009 (7.5). Individual categories comprising this index remained unchanged versus the prior month, except for small appliances (9.7%) down 4.1% pts.
  • Among retail categories not included in the index (new car, used car, and new home), past 30-day purchases of new cars (3.3%), reflecting February activity, was up from the prior month (2.5%), while used cars remained steady and homes declined. The next 30-day planned purchasing (reflects March activity) points to a decline for new cars, 1.1% versus 2.7% the prior month. Used cars and homes remain unchanged from the prior month.

The Consumer Reports Retail Index looks at consumer purchases in the past 30 days as well as the outlook for planned purchases in the next 30 days across several categories. The Consumer Reports Retail Index represents the proportion of respondents that made a purchase in the following categories: major home appliances, small home appliances, major home electronics, personal electronics, and major yard and garden equipment. The Retail Index is a weighted calculation. For example, a major appliance is of greater value than a small appliance. Because of their size and frequency, car and home purchases are tracked separately.

Consumer Reports Stress Index: 57.7

  • The level of stress consumers feel they are under is down compared to prior months and the Consumer Reports Stress Index is now at 57.7 versus February (59.9) and December (63.0).

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).

Consumer Reports Employment Index: 48.7

  • The Consumer Reports Employment Index stands at 48.7 for March, reflective of net job losses in the prior 30 days, and was on par with February (49.0). In the past 30 days, 6.0% reported losing their job versus 3.5% starting a new job.

The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30 days.

For more information regarding the Consumer Reports Index visit www.ConsumerReports.org.

The Consumer Reports Index, conducted by the Consumer Reports National Research Center is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,258 interviews were completed (1,008 households, 250 cell phones) among adults aged 18+. Interviewing took place between February 25 and February 28, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: C. Matt Fields, 914.378.2454, cfields@consumer.org.

Consumer Reports has no commercial relationship with any advertiser or sponsor appearing on this newspaper's web site.

 
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