PRINCETON, NJ -- As the Federal Open Market Committee meets in Washington, D.C., over the next two days, Gallup's economic data reveal a fragile U.S. economy. The most recent weekly data show that Gallup's Consumer Confidence Index remains at its high for the year, its Job Creation Index is up slightly, and even a consumer spending uptick. Yet, compared to a year ago, conditions on Main Street show how far the economy has to go, with the Job Creation Index down 13 points and spending down 26% from a year ago.
What Happened (Week Ending Sept. 20)
Job Creation improved slightly, as Gallup's Job Creation Index increased to +1 -- the second weekly improvement in a row and only the second time this year the Index has exceeded zero. Compared with earlier this year, employees report fewer companies are letting people go -- the percentage is 23% for the second week running. At the same time, 24% of employees say their companies are hiring -- up from the prior week and the same as a month ago. The percentage of companies reported to be hiring is down 10 points from the same week a year ago, while job losses are up 3 points. Although the rate of job loss seems to be moderating, there appears to be no job growth.
Consumer Confidence remains at its 20-month high, with Gallup's Consumer Confidence Index at -23. Confidence is slightly better than it was a month ago (-28) and far better than a year ago (-56). Four in 10 Americans say the economy is "getting better" while 53% say it is "getting worse." Still, 45% rate the current economy as "poor," reflecting the fact that while consumers are much more confident about the future direction of the economy, most have yet to see its improvement in their daily lives.
Consumer Spending experienced another uptick last week, as self-reported average daily spending in stores, restaurants, gas stations, and online increased by $12 -- resulting in a $72-per-day spending level. Still, even after this uptick, spending remains down 26% from the $97 average daily spending during the same week a year ago. Consumer spending in 2009 continues to compare unfavorably to that of 2008.
What to Watch For
The Federal Open Market Committee meets Tuesday and Wednesday to consider interest rates and the Fed's efforts to support the various credit markets. Although no one expects a change in current interest-rate policies, observers will give a lot of attention to whether the Fed decides to reduce its support for housing finance. Will Chairman Ben Bernanke feel that housing and the economy have stabilized enough so that its current "special" funding support is no longer needed? If the Fed pulls back on its housing support, will that make it easier for the Congress to allow the $8,000 housing credit for first-time home buyers to languish as well?
Gallup's data suggest that the U.S. economy remains extremely fragile despite all the enthusiasm about the economic recovery. While Gallup's Job Creation Index points to stabilization in the jobs market, it suggests that jobless claims may be slightly higher when announced this Thursday than they were the prior week. Further, Gallup's early look at September's unemployment rate -- which the Labor Department will report Oct. 2 -- suggests an increase to 9.8%.
Similarly, Gallup's Consumer Confidence Index suggests that consumer confidence has stabilized at its best level of the year. The Reuters/University of Michigan Consumer Sentiment Index is likely to reflect that stability when it is announced Friday morning. At the same time, Gallup's data underscore how positive current consumer confidence levels are right now relative to a year ago, when the financial crisis first hit the U.S. economy with incredible force.
In sum, signs that the U.S. economy has stabilized should not be overestimated. This is the case for the equities markets and for policymakers as well. While confidence is a lot higher now than a year ago, consumer spending, job-market conditions, and the U.S. economy as a whole are not showing much improvement on Main Street. Acting as though improved consumer confidence will automatically produce improvements in everything else ignores the continuing evidence that consumer confidence is currently decoupled from consumer spending and job creation.
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 Sept. 7-13, 2009, are based on telephone interviews with 2,940 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 1,627 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.