Consumers Lose Even More Confidence
"In certain areas in Manhattan and Brooklyn, they have this new thing…they're trying to eliminate doormen," explains Rodriquez, 42, a married father of four children who lives in New York City. Now he's rethinking plans for a vacation to Florida: "For my family and me, just to fly is almost $2,000. If I wanted to take my kids to Walt Disney, to get in the park, it's $600."
Analysts agree that consumer spending—and attitudes—can't perk up until unemployment eases. Right now, Labor Dept. statistics remain sobering: a 9.5% unemployment rate in June, up from 8.9% in April; 7.2 million jobs have been lost since December 2007. "When the stock market rises enough to make businesses start hiring again, that is when you'll see positive emotions from consumers," says Prashant Malaviya, associate professor of marketing at Georgetown University's McDonough School of Business. Malaviya specializes in consumer psychology.
Some Positive Indicators Scott Evans, a real estate appraiser who owns Evans Appraisal Service in Clarks Summit, Pa., says his industry is awaiting an easing of unemployment. "If people don't have jobs, they're not going to buy houses."
Employment concerns like Rodriguez's are the primary driver for the recent drop in the Consumer Confidence Index (CCI), a figure derived from a survey of 5,000 U.S. households that determines the willingness of consumers to spend money. The CCI declined from 49.3 in June to 46.6 in July, and is down from 51.9 in July 2008. "The lingering concern about jobs is the strongest factor in consumer confidence," Malaviya says. This reluctance of consumers to spend co-exists with positive economic indicators, namely the recent rebound of the stock market and what some believe to be the bottoming out of the real estate market.
Indeed, the Dow has surpassed 9,000 for the first time since January, and the number of people saying they planned to buy a home within the next six months dropped from 2.6% in June to 2.1% in July, according to CCI data. That suggests the number of prospective buyers waiting on the sidelines has begun to wane, with transactions likely to commence. "This may be a silver lining as far as housing also seeing bottom," says Lynn Franco, a spokeswoman for The Conference Board, the New York nonprofit research firm that conducts the monthly confidence survey.
A Decline in Freelance Gigs None of the recently positive indicators makes David Robinson feel more compelled to spend money. "The stock market rise doesn't make me more optimistic because of all I've seen in the media about how high unemployment is—all those job losses in Detroit," says Robinson, an actor and former graphic artist who lives with his wife, Mary Lynn, a corporate trainer, in Metuchen, N.J. "Like a lot of people, when it comes to spending, we're on 'low hum'—like a computer that's on but asleep."
Robinson is still feeling the pinch from the decline in freelance acting jobs and being forced to give up his previous occupation as a graphic artist, due to what he cites as the decline in the need for creative work that started after the September 11 attacks and, thanks to the recession, seems unlikely to rebound. "Our house [value] has taken a hit," Robinson says. "We were looking into fixing our roof and other standard maintenance of our house—the kind of things you want to keep current with—but because of 9/11 and the recession, we're not able to keep up."
Now that the Robinsons' daughter, Katharine, has been accepted at the Juilliard School, the prestigious performing arts institution, they will have an annual tuition of $40,000-plus to pay. To raise tuition money, the couple threw a July 27 benefit at which a comedian, juggler, magician, and singer all appeared free of charge. But the couple didn't have much luck persuading businesses in Metuchen, an upper-middle-class enclave known for its cozy charm, to donate food for the event. "We went up and down Main Street and some of the peripheral streets asking for donations of things like wine and cheese," Robinson recalls. "Store owners said they just didn't have any leeway as far as giving things away."