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Nation's economic mood darkens as more jobs vanish
2009-01-27
NEW YORK - This is one recession Americans aren't going to spend their way out of. The Conference Board said Tuesday its Consumer Confidence Index edged down to 37.7 this month, a record low, from a revised 38.6 in December. It stood at about 87 just a year ago. Americans are battered by headlines about massive job cuts, including thousands at Home Depot, Corning, General Motors and Caterpillar in just the past two days, and are still watching the values of their homes and retirement funds dwindle. "Virtually, there is no confidence out there," said Bernard Baumohl, chief global economist at The Economic Outlook Group LLC. "Household anxiety has reached a point that we can count them out to get us out of the recession." Economists believe Americans will remain in a financial funk until they start seeing fundamental improvements in the economy, including a turnaround in the housing and job markets. And two other reports Tuesday suggested that's unlikely to come soon. The Labor Department announced that state unemployment rates shot up nationwide in December, with Indiana and South Carolina racking up the largest monthly increases. South Carolina's jobless rate bolted to 9.5 percent, more than 2 percentage points above the national rate. And the Standard & Poor's/Case-Shiller 20-city housing index dropped by a record 18.2 percent in November from the same month a year earlier -- the sharpest annual rate since the index's inception in 2000. The gloomy news initially sent the Dow Jones industrial average lower, but by mid-afternoon it took heart from some positive earnings reports, finishing up about 58 points at 8,174. President Barack Obama and Congress are scrambling to enact a $825 billion package of increased federal spending, including money for big public works projects and for states, as well as tax cuts to revive the economy. That could encourage Americans to spend more, but Baumohl believes the relief would be only temporary unless financial institutions become healthy enough to revive lending. Tighter credit has been a challenge for shoppers and businesses alike. Federal Reserve policymakers are gathering this week to examine what other tools they can use to help ease a recession that started in December 2007. They are all but certain to leave the benchmark interest rate at its current record low. But without the help of consumer spending, which accounts for more than two-thirds of economic activity, the economy faces a slow recovery. In past recessions, consumers had helped the economy dig itself out of its funk. Americans "are feeling extremely bad about jobs -- both current and expected," said Lynn Franco, director of The Conference Board Consumer Research Center. The Conference Board survey showed fewer people expect to get raises over the next few months, or for jobs to be plentiful. Nationally, the unemployment rate, which stands at a 16-year high of 7.2 percent, could hit 10 percent or more later this year or early next year, according to some analysts' estimates. Michigan and Rhode Island already had unemployment rates in double digits last month. And the pink slips keep coming. Corning Inc. said Tuesday it is cutting 3,500 jobs, or 13 percent of its payroll, as demand slumps for the glass used in flat-screen televisions and computers. A day earlier, tens of thousands of layoffs were announced by Pfizer, GM, Caterpillar, Texas Instruments and Home Depot. The consumer confidence survey, which sampled 5,000 U.S. households through Jan. 21, showed Americans remain pessimistic. Nearly 48 percent now say business conditions are "bad," while less than 7 percent say conditions are "good." Shoppers' splurges on everything from sweaters to pillows in recent years have kept factories humming in China and have fueled store expansions and hiring in the United States. Now the most severe spending pullback in decades is sending a number of stores into liquidation, with Circuit City and discount clothing chain Goody's Family Clothing among the biggest names. The merchants that manage to survive are slashing inventories and closing stores, sending pain to all corners of the economy. Stores limped through the weakest holiday period in four decades by one measure, and retail sales appear to be only deteriorating in January. The National Retail Federation, the world's largest retail trade group, predicts that retail sales will fall 0.5 percent this year, well below the meager 1.4 percent gain last year. ___ AP Real Estate Reporter J.W. Elphinstone in New York and AP Economics reporter Jeannine Aversa in Washington contributed to this report.
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