Deterioration in Some Consumer-level Stats
According to the Consumer Metrics Institute, their weighted sector composite index continued to show deterioration in May. Reuters today, in Spending Stalls, but Confidence and Incomes Gain , confirms that the trend in May is a continuation of the trend seen in April. The Reuters article has a positive spin on confidence and income gains, but with the market steadily eroding during May, the effect of lower stock prices on these stats may lag until updates are released in June.
The Consumer Metrics Institute Weekly Personal Finance Sub-Index hit an all-time low when last recorded in mid-May. This index tracks consumer actions related to default, foreclosure, and credit counseling services. A low reading in the sub-index relates to increased activity in pre-default and foreclosure activity. Reaching an all-time low just two weeks ago is not a positive confirmation of a recovery gaining steam.
It may not be coincidental, but many unemployed are reaching their 199-week limit for benefits. The recent trend of decreased savings, cited by some as evidence of improved consumer confidence, may simply be the result of unemployed tapping savings as their benefits run out. If we see an increase in 401K and IRA withdrawals soon, that would confirm a more negative view of savings being tapped. The stats for mass layoffs show we are entering the 199-week lag time since the bulk of mass layoffs took place from October 2008 to July of 2009. The lowest level of mass layoffs during that time was Oct 2008 at 2,125 mass layoff events. Jan 2009 was the high point at 3,806. If the long-term unemployed are tapping savings as soon as benefits run out, this is not a good sign because the current trend involves mostly workers from states where the unemployment rate is less than 8.5% and benefits do not reach the 199-week limit. These would also be states where workers who have exhausted benefits have a better chance of finding a job. Thus, predictions that employment will recover very slowly are well-founded.