Consumer fatigue growing
US confidence index plunges
NEW YORK - This is one recession Americans aren't going to spend their way out of.
The Conference Board said yesterday its consumer confidence index edged down to 37.7 this month, a record low, from a revised 38.6 in December. It stood at about 87 just a year ago.
Americans are battered by headlines about massive job cuts, including thousands at Home Depot, Corning, General Motors, and Caterpillar in just the past two days, and are still watching the values of their homes and retirement funds dwindle.
"Virtually, there is no confidence out there," said Bernard Baume, chief global economist at The Economic Outlook Group LLC. "Household anxiety has reached a point that we can count them out to get us out of the recession."
Economists believe Americans will remain in a financial funk until they start seeing fundamental improvements in the economy, including a turnaround in the housing and job markets. And two other reports issued yesterday suggested that's unlikely to come soon.
The Labor Department said state unemployment rates shot up nationwide in December, with Indiana and South Carolina racking up the largest monthly increases. South Carolina's jobless rate bolted to 9.5 percent, more than 2 percentage points above the national rate.
And the Standard & Poor's/Case-Sheller 20-city housing index dropped by a record 18.2 percent in November from the same month a year earlier - the sharpest annual rate since the index's inception in 2000.
Oil prices tumbled sharply, with light, sweet crude for March delivery losing $4.15 a barrel, or 9 percent, to settle at $41.58 in trading on the New York Mercantile Exchange. It was the second straight day of declines after oil prices rallied last week.
President Obama and Congress are scrambling to enact an $825 billion package of increased federal spending as well as tax cuts to revive the economy.
That could encourage Americans to spend more, but Baume believes the relief would be only temporary unless financial institutions become healthy enough to revive lending. Tighter credit has been a challenge for shoppers and businesses alike.
Federal Reserve policy makers are gathering this week to examine what other tools they can use to help ease a recession that started in December 2007. They are all but certain to leave the benchmark interest rate at its current record low.
But without the help of consumer spending, which accounts for more than two-thirds of economic activity, the economy faces a slow recovery. In past recessions, consumers had helped the economy dig itself out of its funk.
Americans "are feeling extremely bad about jobs," said Lynn Franco, director of The Conference Board Consumer Research Center. The Conference Board survey showed fewer people expect to get raises over the next few months, or for jobs to be plentiful.
Nationally, the unemployment rate, which stands at a 16-year high of 7.2 percent, could hit 10 percent or more later this year or early next year, according to some analysts' estimates.
Corning Inc. said it is cutting 3,500 jobs, or 13 percent of its payroll, as demand slumps for the glass used in flat-screen televisions and computers.
IBM Corp. has cut thousands of jobs over the past week.