Unemployment Worries Blight US Consumer Confidence

28 July 2005

Americans are increasingly worried about their employment prospects, it emerged in the latest Conference Board report on US consumer confidence.

The closely watched monthly survey of public sentiment fell steeply during July from a revised 106.2 in June to 103.2. A consensus of analysts had predicted a reading of 106.

The slump in confidence is unsurprising given the recent high profile announcements of large-scale layoffs by such household names as General Motors, Ford, Kimberly-Clark, Sara Lee and others.

At the same time, consumers see the ongoing and unregulated pressure of 'market forces' exporting US manufacturing and administrative jobs to low-cost labour areas abroad..

The Board's measure of consumer sentiment rests on two simple criteria: the number of people who say they believe "jobs are plentiful"; and those who think them "hard to get".

In the case of the optimists, the figure remains static at 22.5% - whereas the pessimists rose from 22.5% in June to 23.8% in July - a significant downbeat shift after a run of three bullish months.

However, CB research director Lynn Franco downplays the U-turn in morale, seeing it "as no cause for concern". Donning her Little Mary Sunshine hat, she added: "The overall state of the economy remains healthy and consumers' outlook suggests no storm clouds on the short-term horizon."

She cites data on retail sales which suggest that consumers remain optimistic. "Retail spending makes up two-thirds of the US economy, so consumer confidence is an important barometer of economic growth prospects.

Data sourced from BBC Online; additional content by WARC staff