Americans' confidence falls off in Aug
NEW YORK (AP) — Americans are feeling worse about the economy than they have in a long time — a fact that could have wide-reaching implications everywhere from Wal-Mart to the White House.
Despite improving U.S. job and housing markets, consumer confidence fell to the lowest level it's been since November 2011, according to The Conference Board, a private research group. The results are the latest swing in the index, which has been on a rollercoaster ride this year.
The index declined in January, rose in February and then posted four months of declines before registering an increase in July. August's reading indicates that the gains in the job and housing markets aren't big enough to put to rest Americans' economic fears. That not only threatens to put a damper on retail sales for the back-to-school and winter holiday seasons — the two biggest shopping periods of the year — but it also could have an impact on how Americans vote in November's presidential election.
Mark Vitner, a Wells Fargo Securities senior economist, says he has looked at October confidence figures during the past elections of sitting presidents since 1972. No president has been re-elected when confidence was below a reading of 90, which indicates a healthy economy. The index hasn't reached that level since December 2007.
The New York-based Conference Board said its Consumer Confidence Index in August fell to 60.6, down from a revised 65.4 in July and the 66 analysts were expecting. The index now stands at the lowest it's been since November 2011 when the reading was at 55.2.
"This report is a little disturbing going into the fall," Vitner said. "Consumers are less optimistic about the future."
Elizabeth Dann, a May 2012 graduate of Georgetown Law School, certainly is. She says her confidence has soured more in the past few months as she continues to struggle to find a permanent job in the law field. Dann, 30, who is eight months pregnant and married to someone who is in finance, says she has been cautious about spending.
"I really saw law school as a way to ride out the recession," said the New Rochelle, N.Y. resident. "I was optimistic."
But the job market hasn't picked up the way she expected, and Dann, who voted for Obama in the 2008 election, is now unsure who she will cast a vote for in November. "We don't have someone on our side," she said.
The August consumer confidence reading shows that despite signs that the economy is recovering, many Americans are like Dann in that they aren't being encouraged by the snail's pace by which it's improving.
Home prices rose 0.5 percent in June from the same month last year, the first year-over-year increase since the summer of 2010, according to The Standard & Poor's/Case-Shiller home price index that was released Tuesday. Additionally, all 20 cities tracked by the index rose in June from May, the second consecutive time in which every city posted month-over-month gains.
The job market also is slowly on the mend. Employers added 163,000 jobs in July, the most since February. Job gains averaged 73,000 jobs a month from April through June. But that's not enough to keep up with a rising population, and the unemployment rate increased to 8.3 percent from 8.2 percent in June.
Most economists say stronger growth is needed to produce enough jobs to lower unemployment — and make Americans feel better. The economy grew at an annual rate of 1.5 percent from April through June, down from 2 percent in the first quarter and 4.1 percent in the fourth quarter of 2011.
"Consumers were more apprehensive about business and employment prospects," said Lynn Franco, director of Economic Indicators at The Conference Board in a statement.
The Consumer Confidence index, based on a survey conducted Aug. 1 to Aug. 16 with about 500 randomly selected people nationwide, underscored Americans' anxiety about the future. Consumer confidence is widely watched because consumer spending accounts for 70 percent of U.S. economic activity.
In the latest reading, the percentage of consumers expecting business conditions to improve over the next six months declined to 16.5 percent from 19. Those expecting more jobs in the months ahead declined to 15.4 percent from 17.6 percent, while those expecting fewer jobs rose to 23.4 percent from 20.6 percent.
In addition to worries about jobs and business conditions, Americans' outlook also may be influenced by gas prices. They fell sharply from a peak of $3.94 in early April, but have started to surge again in recent weeks. In fact, gas prices at the pump rose 19 cents to $3.71 during the period that captures the survey.
Americans also are worried that the U.S. economy will go off a "fiscal cliff" at the end of the year, said Vitner, the Wells Fargo economist. That's when tax increases and deep spending cuts will take effect, unless Congress reaches a budget agreement by then.
Despite their economic worries, Americans who have jobs appear to be optimistic about one thing: their future earnings potential. According to the index, the proportion of consumers expecting an increase in their incomes improved to 15.7 percent from 14.2 percent.
Jason Wilczak, 29, of Broad Brook, Conn., says he's feeling better this month after he learned of a $10,000-pay raise. Wilczak, who has two children, ages 7 and 5, had been a machinist but retrained as a software developer during the recession. He will now be making $65,000 a year.
"This makes me feel better," he said. "As far as I'm concerned, things are moving in the right direction."
AP Economics Writer Marty Crutsinger in Washington contributed to this report.