PRINCETON, NJ -- Labor Day season this year reveals a national job market that needs reviving, as job creation fell to its lowest level in seven weeks during the week ending Sept. 6. Consumer confidence also fell from its record high even as consumer spending increased 25% during the week leading up to the holiday -- but even with this increase, spending remains down 38% from the same week a year ago.
What Happened (Week Ending Sept. 6)
Job Creation fell last week, with 22% of employees saying their companies were hiring -- down from 25% the prior week as well as a month ago. The gap between job creation and job loss increased to 4 percentage points, as 26% of employees said their companies were letting people go. The percentage of companies reported to be hiring is down 41% from the same week a year ago.
Consumer Confidence declined slightly from its new high of the previous week as the percentage of Americans saying the economy is "getting better" fell to 37%. Confidence is now slightly below that of a month ago (40%) but is much better than the 18% of a year ago. The percentage saying the economy is "getting worse" is at 58% -- slightly worse than the month-ago level (55%) but far better than the 76% of a year ago. On the other hand, although Americans' views of the economy in recent days have also improved slightly, with the percentage rating the economy "poor" at 44% -- better than the 46% of a month ago -- only 39% rated the economy this way a year ago.
Consumer Spending bounced up as expected for the week leading up to the Labor Day holiday, as self-reported average daily spending in stores, restaurants, gas stations, and online increased by $14 -- resulting in a $70 spending level. Still, this spending uptick leaves spending down 38% from the $113 average daily spending during the week leading up to the holiday a year ago.
What to Watch For
The Labor Department will report jobless claims on Thursday for the week leading up to the Labor Day weekend. Last Thursday, claims exceeded the consensus estimate as expected, with 570,000 reported for the week ending Aug. 29 while the four-week moving average of initial claims remained fairly steady at 571,250. Government-reported jobless claims are volatile and hard to estimate around holidays, but regardless of what the Labor Department reports, Gallup's Job Creation measure indicates a decline in job creation -- in turn, implying that jobless claims will once again exceed the current consensus forecast of 565,000 when reported on Thursday.
As was indicated by the increase in the reported unemployment rate to 9.7% last week, the job market remains weak. While the lack of job creation last week may be the result of a holiday aberration, it deserves particularly close monitoring over the next few weeks given the continued weakness of recent data and in light of the continued weak consumer sales environment. A further weakening of the U.S. job market is the last thing the U.S. economy needs right now.
On the other hand, the preliminary consumer sentiment report probably deserves to be highly discounted when it is announced on Friday. Gallup's consumer confidence data suggest a slight decrease during the first week of September compared to the month of August. The data also show confidence at a fairly high level now compared to the past 20 months. And, the sample sizes upon which the Gallup estimates are based far exceed that of the preliminary consumer sentiment survey.
Regardless, it seems increasingly clear that consumer spending is decoupled from consumer confidence. In turn, this implies that the vaunted consumer sentiment findings have no real meaning for the future direction of spending -- at least, in the current economic environment.
In this regard, Gallup spending data -- like the surprisingly sharp drop in consumer credit reported Tuesday -- provide little reason for optimism on the part of business in general and retailers in particular. The new normal in spending continues to be far below levels of a year ago. In theory, this comparison to last year's spending numbers should be improving as last year's comparables become easier to match. So far, however, that gap has not closed, and if this continues to be the case, it will be extremely worrisome for sales expectations during the Christmas holidays.
For Gallup Daily tracking, Gallup interviews approximately 1,000 national adults, aged 18 and older, each day. The Gallup consumer perceptions of the economy and consumer spending results are based on random half-samples of approximately 500 national adults, aged 18 and older, each day. The Gallup job creation and job loss results are based on a random half-sample of approximately 250 current full- and part-time employees each day. Results from the week of Aug. 31-Sept. 6, 2009, are based on telephone interviews with 3,408 adults for the consumer perceptions and spending questions. For these results, one can say with 95% confidence that the maximum margin of sampling error is ±2 percentage points. Results for the job creation and job loss questions are based on interviews with 1,767 employees, with a maximum margin of error of ±3 percentage points.
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.