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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Softechie who wrote (4372)	11/8/2001 10:52:04 PM
From: t2	Read Replies (1) \| Respond to of 99280

Investors' Intelligence Poll: Bullish Sentiment Falls Would that not be an incrementally bullish contrarian indicator for this market right now?

To: Softechie who wrote (4372)	11/8/2001 11:02:56 PM
From: Softechie	Respond to of 99280

After Ugly Jobs Report, Consumers' Reaction Is Key Risk 02 Nov 15:01 By Michael Casey Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- U.S. investors appeared to take only a brief, anxious glance at an unexpectedly bad October employment report Friday, but then shrugged it off and went about adding an extension to the past few days' stock market rally. But a more important group of Americans might have a more lasting, negative reaction: consumers. How households respond with their spending plans will ultimately have more influence on the direction of the overall economy than the fact that fund managers bought equities Friday. "Nothing has a bigger impact on consumers, plus or minus, than a change in labor market conditions," said Ken Goldstein, chief economist at the Conference Board, which compiles a closely watched monthly index of consumer confidence. "Nothing cheers the heart of Joe Six Pack more than to hear that more jobs were created last month and nothing depresses the average person more than to hear about the unemployment rate going up." News that the unemployment rate leapt to 5.4% in October from 4.9% in September - against expectations for a rise to 5.2% - could create what economists call a secondary "headline shock." As people digest the news when they learn of it, the risk is that they will read it as a sign that their own jobs are in danger and respond by reining in spending. That, in turn, would lead to more economic weakness, raising the specter of more job cuts and unleashing a vicious cycle of self-fulfilling negative responses. "With this kind of number there is no question that the next time we get a reading (on consumer confidence) the number is going to be down from where it is," the Conference Board's Goldstein said. Labor market news is so important to consumer confidence that "every other headline might as well be page three," he said. Already, the Conference Board's index has fallen sharply from its all-time high of 144.7 in January last year, and more recently it has seen some sharp declines that were clearly related to concerns aroused by the Sept. 11 terrorist attacks on New York and Washington. On Tuesday, the Conference Board reported that the index dropped to 85.5 in October from 97.0 in September. The University of Michigan's consumer sentiment index, meanwhile, was more stable in October, rising to 82.7 from 81.8 in September, but in the preceding month it dropped to 83.6 from 91.5 in August. After the recession of 1990/91, the Conference Board's index dropped to a low of 47.3 as unemployment neared its post-recession peak in 1992. Given that many now believe the U.S. has already entered a recession, that past experience would indicate that confidence - and its corollary, spending - has further to fall. The latest jobs data will be a catalyst for that, economists say. "Even before this number, mushrooming layoffs and the War on Terrorism have beaten down consumer confidence and this clearly exacerbates the concern about employment and jobs," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "I suspect that a recession will be deeper as a result, as consumers will assume more defensive positions." A special concern for economists is that the sharp deterioration in the labor market is occurring in the lead-up to the holiday shopping season, which can account for up to 40% of some retailers' annual sales. It is an inopportune time for consumers to be closing up their wallet books. But there's also a wild card in the mix: the War on Terrorism. Wells Fargo's Sohn argues that any evidence of progress on the war - either in the way it is handled at home or in the current conflict in Afghanistan - could provide a much-needed boost to confidence and spending. Sohn notes that "there is plenty of money in the pockets of consumers, from employment, tax cuts and lower cost of energy and from (mortgage) refinancings" that "will be put to work" if the national mood can get a boost. He argues that U.S. consumers could find a way to live with the threat of terror, much the same way that U.K. consumers kept their economy growing during the bombing campaign of the Irish Republican Army in during the late 1980s and early 1990s. "We are not afraid of risk, as long as we can live with it, quantify it, hedge against it...that's what the British did," Sohn said. But the Conference Board's Goldstein is far more pessimistic. He's predicting the worst holiday shopping season in a decade. Uplifting developments in the War on Terrorism are "just flat out not going to happen," Goldstein said. "We are not going to catch Osama bin Laden, and it is very unlikely that we will get any resolution in Afghanistan before the winter sets in. "So, expecting consumers to say we've got this far, so let's go ahead and splurge. That's just not going to happen," he said. -By Michael Casey, Dow Jones Newswires; 201-938-2009; michael.j.casey@dowjones.com (This story was originally published by Dow Jones Newswires) Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved