PRINCETON, NJ -- Gallup's Net New Hiring Index was positive last week for the first time since the first week of January, with more workers telling Gallup their employers are hiring rather than letting people go. American consumers' mood remains improved, but spending continues to disappoint, falling more than 40% below levels of the same week a year ago. Could today's spending levels really be the "new normal"?
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The Gallup Consumer Mood Index was -52 last week -- very close to the prior week's -50, which itself was a new high for the year and one of the Index's best weekly averages since its inception in January 2008. The Index is now slightly higher than it was a month ago (-57) and is 49 points better than a year ago (-101). Like the U.S. equities markets, the Consumer Mood Index has surged since early March, but it gave back a little of that improvement last week.
The Consumer Mood Index is based on Americans' answers to two questions regarding current U.S. economic conditions and the economy's direction. Consumers remain somewhat negative along both dimensions, but much less so than in early March or even a year ago.
Consumer perceptions that the economy is getting worse (56%) rather than better (38%) deteriorated a little to a net -18 this past week; still, this is 41 points better than in early March. Similarly, perceptions of current economic conditions remain much more negative than positive, with only 11% calling them "excellent" or "good" versus 45% rating them "poor" -- but this again compares favorably to the early March reading (a 23-point improvement).
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Americans reported spending an average of $61 per day in stores, restaurants, gas stations, and online last week -- similar to the readings of the prior week and a month ago. Spending last week was down $43 from the same week a year ago. That is slightly improved from the $51 year-to-year decline of the previous week. Both of these comparisons suggest that the surge in consumer mood has, at best, helped stabilize consumer spending at very low levels compared to those of a year ago. (Gallup's spending data are based on Americans' self-reports of the total amount of money they spent the prior day on purchases other than a home, a motor vehicle, or their normal monthly bills.)
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Employees' reports on hiring and firing patterns at their own workplaces improved for the second week in a row last week, as Gallup's Net New Hiring Index for the week ending May 17 was +3. This is the first weekly positive value for the Index since the first week of January, and is up six points from the prior week and eight points from the week ending May 3.
The improvement in the Index over the past two weeks resulted from a four-point increase in the percentage of full- and part-time employees saying their employers are hiring people (now 26%), and a four-point decline in the percentage reporting that their companies are letting people go (now 23%).
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The Gallup Standard of Living Index averaged 57 during the past week, down only slightly from 59 the prior week that was its highest level in more than a year. The Index is up from 50 points a month ago and 49 a year ago.
The Standard of Living Index is based on two questions -- one asking about respondents' satisfaction with their current standard of living and the other about the perceived direction of their standard of living. This past week, more consumers once again said their standard of living is getting better (42%) than said it is getting worse (36%). At the same time, 75% of consumers said they are satisfied with their standard of living and 24% were dissatisfied, virtually the same as the previous week's results.
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The Gallup Consumer Worry Index came in at 34 for the week ending May 17 -- identical to the month-ago and year-ago readings. The highest worry reading since the inception of the Index in January 2008 was 45 last October; however, it has reached as high as 39 this year, in mid-February.
Last week's improvement in Gallup's Net New Hiring Index is good news for a U.S. economy that is losing jobs at the rate of more than a half-million per month, particularly when consumer spending does not seem to be responding to a dramatic positive surge in consumer mood. A perceived increase in job security can only help reassure consumers who are still holding back on their spending because of insecurity about keeping their jobs.
Still, the job fallout of the Chrysler bankruptcy, the potential bankruptcy of General Motors, and the resulting closure of thousands of auto dealers in communities across the nation is yet to be fully felt. Further, if consumers continue to build their personal balance sheets and pare their spending, other retailers and small businesses may soon join the fate of the disappearing auto dealerships. In this regard, the 40% decline in consumer spending compared to the same time a year ago is not good news for retailers or small-business owners.
Looking ahead, the real question is whether the failure of consumer spending to rebound is the result of consumer job and income uncertainties and a lack of credit or, instead, because the country is reaching something of a "new normal." If the current situation is temporary and consumer spending will soon return -- not necessarily to pre-recession levels but to a considerably higher level than at present -- then perhaps the optimism on Wall Street, as reflected in the consumer mood, is justified. However, if current spending levels are the "new normal," then the Main Street economy may still have some major adjustments to endure before there is a sustained recovery.
For Gallup Poll Daily tracking, Gallup interviews approximately 1,000 national adults, aged 18 and older, each day. Gallup's consumer series includes the Gallup Consumer Mood Index (evaluating public perceptions about the U.S. economy), the Gallup Monitor of Consumer Spending (a measure of how much money Americans are spending each day on mainly retail purchases), the Gallup Net New Hiring Index (a measure of employee perceptions of hiring conditions where they work), the Gallup Standard of Living Index (evaluating the public's perceptions about its own standard of living), and the Gallup Consumer Worry Index (a measure of the degree to which Americans are worried about their finances).
The Standard of Living Index is based on questions asked of all respondents; the Gallup Consumer Mood Index, the Gallup Monitor of Consumer Spending, and the Gallup Consumer Worry Index are based on random half-samples of approximately 500 national adults, aged 18 and older, each day. The Gallup Net New Hiring Index is based on a sample of approximately 250 current full- and part-time employees each day.
The sample sizes and associated margins of error for weekly results for the week of May 11-17 are:
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.