Shutdown Sapped Optimism in October As Outlook for Job Growth Weakened
The U.S. government shutdown and the threat of a debt default eroded Americans’ confidence in the first half of October, especially about economic conditions and jobs six months from now, according to figures released Oct. 29 by the Conference Board.
The overall consumer confidence index fell by 9.0 points to 71.2 seasonally adjusted (1985 = 100), down from 80.2 in September and the lowest reading since 69.0 in April, the New York-based nonprofit organization said.
Prior to October’s drop, the index had remained above 80 for four straight months–the longest such stretch since 2008, in the early part of the recent recession.
“Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers’ expectations,” Lynn Franco, the board’s director of economic indicators, said in a statement.
The figures were derived from a survey of 5,000 households conducted through October 17, when the 16-day shutdown ended.
Because Congress funded the government and extended the debt ceiling only until early 2014, confidence is likely to remain volatile for the next several months, Franco said.
The index experienced similar decreases during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the government shutdown in December 1995-January 1996, she said.
Analysts said the loss of confidence on the eve of the holiday shopping season was unwelcome news for retailers because it could reduce consumer spending.
Uncertainty will remain elevated and confidence will stay soft until a longer-term funding deal is ironed out in Congress, said Nate Kelley, an economist at Moody’s Analytics, in a statement.
“Given the government’s track record over the past several years, more gridlock is likely on the way,” Kelley said. As a result, consumer confidence is unlikely to improve much between now and March, “which is especially bad news for retailers as they head into the holiday shopping season,” he said.
More See Jobs as Hard to Get
Within the overall consumer confidence index, the assessment of current conditions component fell 2.8 points in October to 70.7 from 73.5 the prior month, while the expectations index plunged by 13.2 points to 71.5 from 84.7, the Conference Board reported.
The share of consumers who consider jobs currently “hard to get” rose this month, to 35.8 percent from 33.6 percent in September, while the proportion seeing jobs as plentiful held roughly steady, at 11.3 percent. The majority (52.9 percent) viewed jobs as “not so plentiful.”
The Department of Labor’s most recent jobs report, which was not released until Oct. 22 because of the shutdown, showed employers added 148,000 jobs to payrolls in September, while the unemployment rate declined to 7.2 percent from 7.3 percent the previous month .
In October, the share of households viewing current business conditions as good slipped to 19.0 percent from 20.7 percent in September, while the proportion saying conditions are bad also declined, to 23.0 percent from 23.9 percent. The rest saw conditions as “normal.”
Looking ahead, the proportion of survey respondents expecting business conditions to be better six months from now fell to 16.0 percent this month from 20.6 percent in September, and those anticipating worse conditions surged to 17.5 percent from 10.3 percent. The remainder foresaw no change.
Similarly, consumers expecting there to be “more jobs” in six months declined to 15.3 percent in October from 16.1 percent the prior month, while those anticipating fewer jobs jumped to 22.7 percent from 19.1 percent. Another 62.0 expected no change in job availability.
The proportion of households anticipating a decline in their incomes in the coming six months rose to 15.4 percent this month from 13.9 percent in September. Those expecting a gain in income inched up to 15.8 percent from 15.1 percent, with the rest predicting their incomes will stay the same.
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Information about the consumer confidence report is available at http://www.conference-board.org/data/consumerconfidence.cfm.