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November
consumer confidence numbers give credence to what
retailers saw on Black Friday.
Americans
are feeling better, including about the prospect for
finding jobs. They are still skeptical about the
economy, watching their pennies, and determined to find
deals. But the gloom that existed in previous months has
lifted somewhat, and confidence numbers released by the
Conference Board on Tuesday suggest people are relaxing
a little, willing to go shopping and seem to be sensing
a recovery in the economy; albeit a modest and fragile
one.
When
asked about future expectations, consumer spirits
climbed significantly in the Conference Board index —
from a dreary 50 level in October to November’s 67.8.
That level typically corresponds to growth in consumer
spending. The mood almost returned to the level it hit
in the summer, just before the debt ceiling feud in
Congress put the nation into a state of despair.
And when
asked by the Conference Board if jobs are plentiful or
hard to get, there too, the nation’s spirits climbed
more than any time since the January 2009 recession
period. Job worries are still entrenched, though better
— suggesting that those looking for jobs might be
having better luck or workplaces may seem less inclined
to take out the hatchet.
The
confidence numbers hint that November’s unemployment
rate, to be released Friday, might improve a little,
although improvements in outlook and actual numbers
don’t always go together. When people think they might
have a better chance of finding a job, those who stopped
looking for jobs start looking again and then the
federal government counts them as “unemployed.” So
November’s unemployment data might not look any more
promising than October’s.
Also,
although people say they are feeling better about the
job outlook, Goldman Sachs economists said in a note to
clients Tuesday, “the level of confidence remains
low.”
That
means retailers that want to continue luring cautious
shoppers will need to continue cutting prices even if
that eats into profits. And investors should guard
against extrapolating that the 16 percent climb in
sales, estimated by the National Retail Federation after
Thanksgiving, will continue to last.
“Once
price discounting subsides, so should holiday sales,”
said Moody’s economist John Lonski.
He notes
that during past periods when holiday sales soared,
employment income was also rising sharply. For example,
holiday sales in the November-December period of 1999
climbed 8.7 percent, but employment income was climbing
6.9 percent that year. This year, unemployment has
remained stuck at about 9 percent, and working people
have had stagnant pay.
In the
past four quarters, compensation rose just 2.8 percent,
notes market strategist Ed Yardeni. Despite modest gains
in jobs, the Federal Reserve expects unemployment to
remain above 8 percent next year.
Still, if
consumers remain optimistic, that should have some power
over an ongoing recovery in the economy.
The raw
measure of optimism “raises hopes that the threat to
spending from low consumer confidence may be waning,”
said Moody’s Analytics economist Scott Hoyt.
That’s
important because consumers support 70 percent of the
U.S. economy.
But
economists are wondering whether optimism will build
through the holidays and into next year, or fizzle. The
recent consumer survey was done just before the
congressional supercommittee on the deficit reported
prior to Thanksgiving that it couldn’t come up with a
deal. And in the months ahead political debates on
federal tax increases or spending cuts could give rise
again to a feeling of vulnerability.
Further,
Europe’s debt crisis has the potential to sour the
growth in the economy in Europe and perhaps set off a
global recession.
With
European banks holding large quantities of sovereign
bonds that have plunged in value, banks are lending less
in Europe as well as other parts of the world. And
growth is stymied if countries, businesses and
individuals have trouble borrowing the money they need.
The
Organization for Economic Cooperation and Development
said this week that the world has been recovering from
the 2008 U.S. financial crisis but “significant
financial vulnerabilities remain, especially in
Europe.” Among the concerns raised by the organization
are solvency of European banks. In addition, it sees an
“unsettled fiscal situation” in the U.S. as the debt
problems linger and questions build about whether cures
could impede the nation’s growth and jobs.
“Political
problems make fiscal policy almost unpredictable,” the
organization said.
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