The University of Michigan’s index of consumer sentiment fell by 9.5 points last week. According to MarketWatch a drop of this magnitude has only occurred six times since they began taking the survey in 1978:
- March 1980: The month the stock market plunged and confirmed that the nation had entered a recession.
- December 1980
- August 1990: The month Kuwait was invaded;
- September 2001: The month terrorists attacked America;
- October 2005: The month after Hurricane Katrina hit;
- October 2005: The month after Hurricane Katrina hit;
- October 2008: The month after Lehman Bros. collapsed.
The December 1980 decline didn’t seem to be accompanied by some great precipitating event. Is the decline this month the “oil spill decline”? Or are people just plain discouraged?
Just plain discouraged. Over a million people officially dropped out of the workforce in May and June. UE benefits are running out for lots of people, and not just because of the blocked benefit extensions – there’s a lot of 99ers running out of benefits due to long-term unemployment. The economy is creating all of 83,000 jobs a month – that’s almost 170 U-3 unemployed per new job. Add to that all those underemployed and the numbers become staggering.
Even if one is employed there’s a good chance one knows someone who used to have a very good job that has been out of work for a long time now.
So the question shouldn’t be, “Why the big drop in consumer confidence now?” The question should be “What set of delusions did consumers have previously that confidence had this far to fall?”
PS One family I know has been saved from potential homelessness by the oil spill. Both husband and wife had been out of work for over two years when the husband got a call out of the blue to become a work-crew supervisor cleaning up oil from the Deepwater Horizon spill. Not only was the straight pay rate very good, but he’s working 18-20 hours a day seven days a week. Overtime score! Of course that still leaves lots of friends who have still been out of work for 2+ years that can’t find jobs, including myself. Obama nad Biden can fuck themselves with running chainsaws if they think this is a recovery.
A number which correlates with something rather than business worries. I don’t think that many people worry about the economic details we discuss. I suspect that UI benefits going away coupled with worries about the general world picture are primary factors. IOW, it looks bad everywhere.
Steve