The Worst In Three Decades: “Consumers are very fatigued and very uncertain”
Insiders may be buying stocks at the fastest pace in two years, but consumers’ wallets aren’t convinced that the recovery has taken hold (because, of course, it hasn’t):
Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.
The biggest one-week slump in stocks since 2008 and the threat of default on the nation’s debt may have exacerbated consumers’ concerns as unemployment hovers above 9 percent and companies are hesitant to hire. Rising pessimism poses a risk household spending will cool further, hindering a recovery that Federal Reservepolicy makers said this week was already advancing “considerably slower” than projected.
“The mood is very depressed,” said Chris Christopher, an economist at IHS Global Insight Inc. in Lexington, Massachusetts. “Consumers are very fatigued and very uncertain. In the short term, people are going to pull back on spending.”
Bottom line: consumers are broke.
The job market is dying and hundreds of thousands of more jobs are going to be lost over the course of the next two years. The post office is threatening to lay off 120,000 employees. On top of that, ratings agencies will soon be downgrading thousands of local municipalities, which means less money for them to borrow, which means more jobs lost. And those examples are just from the government sector. Private businesses are simply not hiring, because they don’t know what to expect next.
On top of that, emergency funds have been exhausted. That is, credit card balances are being maxed out, 401(k)’s tapped, and savings withdrawn, just to make ends meet.
As food and energy prices begin to strangle consumers further, spending habits will change – voluntarily by those who realize that the recovery was a sham and they may become the next victim, or involuntarily by those who haven’t yet realized that the world is in depression but will when forced austerity measures (public and private) take their toll.
Many Americans are finally beginning to understand their new reality (most still don’t have a clue). And things will only get worse as we move forward, because this time around, once the recovery is exposed as a mirage and it is realized that we are still in recession and the people begin to panic as they did in late 2008 and early 2009, there will be no more bullets left for our government to fire at the problem.
Those may be the worst consumer confidence numbers in three decades, but we would not be at all surprised to see those headlines eventually turn into “the worst in a century.”
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Date: August 12th, 2011
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