By Joseph Lisanti
Consumer spending kept the last recession shallow and is powering the latest expansion. But consumers are worried about the future. The reason is jobs, or the perceived lack of them.
From the March 2001 peak in employment through this September, the U.S. Department of Labor's payroll survey showed a loss of 2.7 million jobs. The same department's household survey showed only 190,000 jobs lost. The reality is probably not as good as the household survey indicates, nor as bad as the payroll survey shows.
David Wyss, S&P's chief economist, says that part of the difference between the surveys is self-employed workers. Freelancers may tell interviewers that they are employed by a company for which they do contract work. They should say that they are self-employed. And the payroll survey excludes these contract workers because, in fact, they are not employees.
The ranks of people who hold multiple jobs declined by some 505,000 since March 2001. This reduces the payroll numbers but doesn't affect the true employment picture.
And a January 2003 Census-data-based statistical adjustment ("rebenchmarking") of the household survey added 575,000 jobs to that universe. The net result was an even greater spread between the surveys.
The more narrowly focused payroll series is finally showing some improvement. In September, payrolls posted an increase of 57,000 and the August figure was revised to a 41,000 decline from a 93,000 drop. Further evidence that the job situation is improving is that initial claims for unemployment insurance dropped by 23,000 in the week ended October 4, to 382,000. Though the previous week's numbers were revised upward, the four-week moving average has dropped below the psychologically important 400,000 level.
With the jobs picture slowly improving, we think consumers will continue to spend. That should encourage some business investment as well. Both are likely to send the market higher.
Lisanti is editor of Standard & Poor's weekly investing newsletter, The Outlook