Consumers shrug off flood of bad news, from today's Times (London)
by Irwin Stelzer
THE calendar says that summer isn't over until September 21. Americans know better: it ends tomorrow. The first Monday of September is Labor Day, a legal holiday since 1894, and a day marked by parades and speeches by politicians in search of trade- union support.
Most Americans are too clever to give up their last long weekend of the summer to attend such rallies. Instead, they have hopped into one of their cars (one in five American households have three or more, and more than half own two or more) to visit relatives or to spend a few days in their vacation houses. Others have stayed at home to barbecue hot dogs, swill a bit of beer, down the symbolic last gin and tonic of the season, and bemoan the fact that summer's lease has all too short a date.
Events this summer should have left Americans in a sour mood. On the east coast, sharks have taken to dismembering swimmers and surfers off the shore of Florida, and Wall Street brokers and others have been told that there will be $30 billion less in bonuses this year. On the west coast, forest fires have scorched tens of thousands of acres, and Californians are paying two to three times as much for electricity as they did last summer. In the industrial heartland, there is a recession in manufacturing that has pulled the nation's second-quarter annual growth rate down to a mere 0.2%.
Add to that the depressed price of shares as company after company reports falling profits or losses, and the headline layoffs from Ford, Gateway and other prominent companies, and it should come as no surprise that the latest survey by the Conference Board shows that consumer confidence fell in August for the second consecutive month, primarily because those who believe that jobs are "hard to get" rose during the month from 14.1% to 15.9%.
The nervousness is noticeable in the shops. Retailers report that parents are insisting on value for money when doing their back-to-school shopping. The upmarket jeweller Tiffany reports that although it is making a larger number of sales, the average value of each is down. All in all, consumer spending rose only 0.1% in July.
But the evidence on consumer attitudes is ambiguous. Although the index of consumer confidence is now about 20% below where it was last year, and consumers have a somewhat dimmer opinion of the economic situation than they did last month, their current view of the prospects for the economy in the next six months is cheerier than it was in July.
Consumers have shrugged off the bad news for several reasons. For one thing, the $300-per-person tax refunds have started to hit mailboxes around the country. For another, real incomes are rising.
Perhaps most important, the value of their principal asset - their homes - keeps rising. The froth may be off the top end of the property market in places such as Silicon Valley, where former dotcom millionaires are finding their monster mortgage payments unmanageable, but by and large the housing market remains strong.
The Los Angeles Times reports that "rising home values, long taken for granted in affluent neighborhoods, finally have begun to improve fortunes in working-class cities across southern California. Modest homes in lower-priced neighborhoods in Los Angeles drove overall median prices in July to a record high of $231,000 as home sales reached near-frenzied levels."
Whatever the reason, Americans seem content. Karlyn Bowman, generally regarded as the most astute analyst of the myriad polls taken to plumb the depths of Americans' psyches, has just released her latest study of "Attitudes About Work And Leisure in America". Some 89% of Americans polled say they are "very satisfied" or "moderately satisfied" with the work they do, 80% report that employers are very or somewhat accommodating to their needs to balance work and family, and, says Bowman, "solid majorities say their corporations are loyal to them".
Only 34% have seriously considered changing their jobs in the past year, and more than half see their work as a career rather than merely a job.
Few seem rattled by the news of big layoffs at leading companies. As late as May this year, when the labour market was already easing, 81% of those surveyed professed themselves "completely" or "mostly" satisfied with their job security, almost 70% felt that they had good opportunities for career advancement, and somewhere between 66% and 79% were satisfied with the income their work provided.
Not all life is coming up roses for Americans, however. Bowman concludes from her reading of several, often conflicting polls, that there is "a new appreciation for leisure" in America.
But money remains the driving force in the lives of most Americans. Half say they daydream about "being rich", and a bit more than half of all women list "more money" as something that would make their lives better. This is not a surprising priority since only 4% say "a better sex life" would make them happier. If that means that 96% are truly satisfied with that aspect of their lives, the rest of the world has much to learn from us.
So, as they get ready to return to work on Tuesday, "Americans are very satisfied with their jobs, and pretty happy with their lives," says Bowman. The most-mentioned source of conflict within families is over which television programmes to watch. And, adds Bowman, two-thirds expect to be better off financially a year from now. Given the uncertain state of the economy, this is no small thing.
The question on the minds of those trying to guess whether the economy has bottomed out, or is due to drop into a recession, is whether consumer cheer can survive much more bad news. Some 66% of Americans already say they have heard mostly bad news about the economy of late, compared with only 19% in April last year. They will hear more.
Democrats will be contending that a profligate president has threatened the viability of the pension programme on which the baby boomers are counting. Share prices still have built into them expectations of a turnround in company profits that some say will not materialise as soon or be as robust as is necessary to prevent a further slump in values. The dollar's gradual softening of the past few weeks might turn into a precipitous slide, preventing the Federal Reserve from continuing to cut interest rates. More layoffs are in the offing and will dominate reports in the press and on television.
If Americans can remain optimistic in the face of that barrage and use their tax-refund cheques to keep goods moving off retailers' shelves, the hoped-for pick-up in economic activity may materialise just in time to justify the optimistic mood in which Americans head back to their desks and factories on Tuesday.
sunday-times.co.uk |
