A key measure of consumer confidence continued to slip in October, with consumers’ gauge of the current economic situation falling to a 26-year low, a research group said Tuesday.
The Conference Board, the New York-based research group, said its Consumer Confidence Index fell to 47.7 in October from an upwardly revised 53.4 in September.
Economists were expecting the index to increase to 53.5, according to a Briefing.com consensus survey. The figure, which is based on a survey of 5,000 U.S. households, is closely watched because consumer spending makes up two-thirds of the nation’s economic activity.
The index component that evaluates consumers’ judgment of the present situation dipped to 20.7 in October, the lowest since the 17.5 measured in February 1983. It stood at 23 in September.
“Consumers’ assessment of the present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment,” said Lynn Franco, director of the Conference Board Consumer Research Center.
Employers continued to cut jobs from their payrolls in September, as the unemployment rate rose to 9.8% and hit another 26-year high in September, according to a reportfrom the Labor Department earlier this month.
The percentage of those claiming that jobs are currently hard to get reached new high of 49.6%, while the number of consumers claiming that jobs are “plentiful” hit a new low at 3.4%.
“It is surprising how uniformly weak this report was,” said Mark Vitner, an economist at Wells Fargo. “The expectations had gotten ahead of themselves. Everyone thought that economy would follow the rebound in the stock market. But now that the rebound has leveled off, folks doubt whether conditions will get better.”
Meanwhile, a pair of economists speaking at a public forum on Tuesday said that economic improvement is on the way, but will take a while to solidify, especially in employment.
“The good news is the bad news is close to being over,” William “Joey” Smith, an economist at the University of West Georgia, said. “We’re already seeing a turnaround at the local and probably at the state levels. By all measures at the national level we are starting to experience recovery.”
But job creation is lagging.
“You already lost about 6 or 7 million jobs in this recession” and those won’t come back overnight, said Donald Ratajczak, a Georgia State University professor emeritus of economics.
Smith and Ratajczak spoke at West Georgia’s annual economic forecast breakfast.
Smith said that while many areas of concern remain, including high unemployment, home foreclosures and high real estate vacancy rates, other signs point to pending improvement.
“The employment situation is starting to stabilize, but it might be a while before there is a significant drop in the unemployment rate, which is a lagging indicator, providing a look at how conditions have been,” he said.
Ratajczak said that although the millions of job losses have been devastating for consumers, businesses had to make cuts in order to survive.
“This has been the most remarkable recovery in terms of productivity. In past recessions, businesses have waited too long to cut workers. This time, they started doing it earlier, which actually helped raise productivity.”
But the Conference Board’s survey found that the outlook for business conditions also grew more pessimistic in October, with the percentage of consumers expecting conditions to worsen climbing to 18.3% from 14.6%.
The overall index remains at historically low levels. A reading above 90 indicates the economy is solid, and 100 or above signals strong growth.
Vitner expects the main index to hover around 50 for the next several months.
“We need to see a real improvement in employment conditions. Layoffs need to stop rising and hiring needs to pick up,” he said. “The soonest that we think that consumers’ confidence will see a sustained rise would be late spring of next year.”
Economists predict GDP, the broadest measure of economic activity, rose at an annual rate of 3.2% in the third quarter of this year after a 0.7% drop in the second quarter. The government will release its advance third-quarter GDP report Thursday.