Late last week, the Labor Department announced that the U.S. economy lost 101,000 jobs in December -- the biggest job loss in 10 months. This was on top of the 88,000 jobs lost in November. And while the overall unemployment rate remains at 6% -- its highest level in eight years -- it is generally expected to climb still higher in the months ahead.
Given those figures, it is hardly surprising that political and economic observers have taken to calling the current economic situation "a jobless recovery." Nor should it be surprising that employee confidence tumbled in December.
Employee Confidence Declines
The Employee Outlook Index* -- a joint effort of UBS and The Gallup Organization -- decreased five points from 71 in November to 66 last month, the same level seen in September and June of last year. Employee confidence remains above its August low of 58, but is also below its April benchmark high point of 72.
Ratings of Present Company Conditions Decline Slightly
All three dimensions of the Employee Outlook Index decreased in December. The Present Company Conditions Index decreased only slightly from 86 in November to its current level of 84. This places employee perceptions of how their companies are currently doing in the marketplace close to their June level (83), but below their April high point of 89.
Ratings of Future Company Conditions Also Decline
While employees rate the current business conditions for their companies only slightly lower, they rate the prospects for their companies over the next six months substantially lower than they did in November. The Future Company Conditions Index decreased six points to 70 in December, putting employee expectations back at their May (70) and June (69) levels.
Confidence in Job Security Also Drops Significantly
The Job Security Index decreased eight points from November to its current level of 44. Like the other dimensions, the Job Security Index is now essentially at the level (45) seen last June. Unfortunately, this also means that the Job Security Index is not far from its July-August low of 41 and well below its May (53) high point for 2002.
Key Points
The Employee Outlook Index was created in an effort to provide another window into the performance of the U.S. economy. In November, this new Index suggested that employee confidence at private sector, for-profit companies had surged upward -- back to a level last seen in April. My guess is that many companies and their employees were hoping for a sharp year-end upturn in both the overall economy and their own businesses as happened at the end of 2001. Clearly, the comments of many politicians and economic observers encouraged this belief around the time of the midterm elections.
In December, however, economic reality hit home. Weak holiday sales, higher oil prices, and another round of layoff announcements made it clear that we are not going to see another "rally effect" in early 2003. As a result, it is not surprising that employee confidence joined the downward trends in both consumer and investor confidence as 2002 came to a close.
Clearly, the current trends in Gallup's attitudinal economic data supports the idea that the current economy needs a strong fiscal stimulus in the immediate term. Unfortunately, I remain unconvinced that our political leaders -- those of both major political parties -- really understand the magnitude of this immediate need.
*Results are based on telephone interviews with 675 adults who are employed with non-governmental, for-profit companies having five or more employees, aged 18 and older, conducted Dec. 5-8, 2002, and Dec. 19-22, 2002. For results based on the total sample, one can say with 95% confidence that the maximum margin of sampling error is ±4%.
