NEW YORK (AP) — Consumers’ confidence remained weak in September after dropping to a post-recession low during the month before. That’s left economists to wonder just what it’ll take to get Americans feeling good about the economy again.
A survey of consumer confidence shows that Americans who were worried in August because of a downgrade of U.S. long-term debt, wild stock markets swings and other concerns, continue to be spooked. Economists say the problem is that not much has changed to make consumers feel financially secure. The stock market is still volatile. Worries about the global economy persist. And perhaps worst of all for confidence, U.S. jobs are still scarce.
“We are well below where we should be, and that’s because the unemployment situation is so bad,” said Paul Dales, senior U.S. economist at Capital Economics. “You have to have a huge fall in the unemployment rate.”
The Conference Board, a private research group, said Tuesday that its Consumer Confidence Index was at 45.4 in September. The number is slightly above the revised reading in August of 45.2, which was the lowest since April 2009. A reading of above 90 indicates the economy is on solid footing.
“The pessimism that shrouded consumers last month has spilled over into September,” said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.
Economists, which watch the index closely because consumer spending accounts for about 70 percent of U.S. economic activity, say it will take at least a year for consumers’ confidence to significantly improve. The problem, they say, is that consumers still feel like they’re in a recession.
It’s not hard to see why consumers are freaked out about the U.S. economy. Net job creation came to a halt in August in the U.S. The unemployment rate was flat at 9.1 percent. Home prices remain weak. And consumers are facing higher prices for everything from food to clothing as retailers try to offset their rising costs for labor and materials.
Consumers also don’t feel good about their prospects. Those claiming jobs are “hard to get” increased to 50.0 percent, from 48.5 percent in The Conference Board’s survey. And the proportion of consumers anticipating an increase in their income declined to 13.3 percent from 14.3 percent.
Franco, with The Conference Board, said that “does not bode well for spending.”
Economists say sustained job growth — monthly job gains of at least 200,000 — will be the most critical component in raising consumers’ confidence. A rallying stock market, rising home values and lower prices for gasoline, food and other things would also help lift shoppers’ moods.
Some economic challenges are already starting to ease. For instance, gas prices, while higher than last year, are starting to come down. The national average is at about $3.48, according to a survey by AAA. That’s up about 78.5 cents per gallon from a year ago but 13 cents lower than a month ago.
Shoppers will also see prices on clothing and home furnishings start to come down by next spring, says Scott Wren, senior equity strategist for Wells Fargo Advisors. Stores had raised prices on average of about 10 percent as they tried to offset higher costs for labor and raw materials like cotton, but those cost pressures have started to dissipate in recent months.
“That will help confidence a little,” Wren said.
Although the stock markets are still volatile, they are calming some. Since the first week of August, the Dow Jones Industrial Average has closed up or down more than 200 points a total of 16 times. The Dow remains down 12.8 percent from its recent peak on July 21, and down 2.3 percent for the year.
A sustainable rebound in the stock market should send confidence back to a reading of anywhere from 60 to 75, said Dales, with Capital Economics.
But two other components that affect sentiment — housing and the job market — aren’t budging much. According to a widely watched Standard & Poor’s/Case-Shiller index released on Tuesday, home prices rose for a fourth straight month in most major U.S. cities in July. But prices are expected to decline in the coming months after the buying season. .
And economists will closely monitor the September jobs figures when they are to be released on Oct. 7. But unemployment rate is expected to remain unchanged at 9.1 percent with employers adding 75,000 jobs.