Americans’ Views on Economy Are Most Pessimistic Since November
Americans this month were the most pessimistic on the economic outlook since late last year as fuel prices rose and unemployment remained elevated.
The share of households viewing the economy as heading in the wrong direction rose to 45 percent in August, the highest since November, from 36 percent the prior month. The Bloomberg monthly expectations gauge dropped to minus 22 from minus 11. The weekly Bloomberg Consumer Comfort Index fell to minus 44.4 in the period ended Aug. 12, lowest since January, from minus 41.9
“The American public appears to have tired of running harder to stand still, expressing their displeasure with the current state of economic affairs in the country and their own personal finances,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
The report raises the risk that a pickup in retail sales last month will not be sustained after gasoline prices climbed by 38 cents a gallon in less than two months. A jobless rate that’s exceeded 8 percent for a post-World War II record 42 months is probably also contributing to concern that the world’s largest economy is failing to make enough progress.
Another report today showed the number of Americans filing applications for unemployment benefits was little changed last week, bringing the average over the past month to the lowest level since late March, a sign the labor market has stabilized after employment picked up in July.
Jobless claims climbed by 2,000 to 366,000 in the week ended Aug. 11, Labor Department figures showed. The median forecast of 45 economists surveyed by Bloomberg called for an increase to 365,000. The four-week moving average, a less volatile measure, dropped to 363,750, the fewest since the week ended March 31.
Also today, new-home construction fell in July, while the number of building permits jumped to the highest level in four years, indicating the industry will keep improving in the second half of the year, figures from the Commerce Department showed.
Stocks advanced, sending the Standard & Poor’s 500 Index higher for a second day, following the reports. The S&P 500 Index rose 0.1 percent to 1,406.81 at 9:40 a.m. in New York.
Two of the comfort index’s three components deteriorated last week. More than half of respondents -- 56 percent -- had a negative opinion of their own finances, the most since May. Almost nine out of every 10 held a negative view on the economy, the most since February.
Slightly fewer people called it a bad time to make purchases, with the buying climate index at minus 46.4 from minus 47.7 in the prior week.
In a nation where consumer spending accounts for 70 percent of the economy, the soft labor market has been eroding household confidence. Paychecks are stagnant, with hourly earnings adjusted for inflation up 0.2 percent over the past 12 months, according to Labor Department data issued yesterday.
“An extended period of underemployment and declining inflation-adjusted earnings has decisively turned public sentiment acidic on the economy,” Brusuelas said.
In a presidential election year, Democrats have reported greater optimism than Republicans for a record 21 weeks, a sign that politics are driving perceptions. Forty-one percent of Democrats say the economy is improving, compared with 5 percent of Republicans and 24 percent of independents. Republicans’ views are among the lowest in data going back to 1998.
Other measures of confidence have been mixed. The Conference Board’s gauge unexpectedly rose in July for the first time in five months, while the Thomson Reuters/University of Michigan’s index fell to the lowest level of the year.
Today’s report showed high-income earners are losing confidence. For Americans earning $100,000 a year or more, the index turned negative for the first time in a month.
The measure for people 45 to 54 years old slumped to a record-low minus 68.4.
A report this week showed Americans were still spending, at least last month. Retail sales climbed 0.8 percent in July, the most since February and first gain in four months, according to data from the Commerce Department.
Target Corp. (TGT) raised its annual profit forecast yesterday as the second-largest U.S. discount retailer increases sales by adding groceries and enticing more spending from customers with a discount card.
The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers 18 and older. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks.
The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points.