Americans' rising concern about the U.S. job market helped trigger a plunge in consumer confidence in June, with the index falling to 52.9 from a revised 62.7 in May, the Conference Board said Tuesday. A Bloomberg survey had expected the index to remain unchanged in June. The index was at 57.9 in April. It hit a record low of 25.3 in April 2009.
Every index component dropped in June, and one can clearly see what's weighing on the minds of consumers: The woeful job market. Those saying jobs are "hard to get" increased to 44.8% in June from 43.9% in May, while those claiming jobs are "plentiful" decreased to 4.3% from 4.6%.
Those expecting fewer jobs to be available in the month ahead increased to 20.8% from 17.8%. Finally, those expecting more jobs ahead declined to 16% from 20.2%.
A Sharp Fall In Confidence
Lynn Franco, director of The Conference Board's Consumer Research Center, said the drop in consumer confidence is palpable. "Consumer confidence, which had posted three consecutive monthly gains and appeared to be gaining some traction, retreated sharply in June," Franco said, in a statement.
"Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence," she said. "Until the pace of job growth picks up, consumer confidence is not likely to pick up."
Americans' evaluation of present-day conditions also was less favorable in June. Those claiming business conditions are "bad" increased to 42.4% in June from 39.5% in April, while those claiming business conditions are "good" decreased to 8% from 9.7%.
Also, Americans' short-term outlook, which had improved substantially last month, took on a more-pessimistic tone in June. Those expecting business conditions to improve over the next six months decreased to 17.2% in June from 22.8% in May, while those expecting conditions to worsen increased to 14.9% from 11.9%.
A Nation Concerned About Jobs
This June report provides a classic example of the link between job market health and consumer confidence. Low unemployment or strong job creation historically has led to increasing consumer confidence, high unemployment or weak/inadequate job creation, to decreasing consumer confidence.
The job market concerns aren't limited to those without jobs. Historically, both people with and without jobs express worry about the job market when they detect a problem with job creation. Those holding jobs use the job market's condition as a proxy for their job security.
May's U.S. nonfarm payroll report provided ample reason for concern about the U.S. job market. Although the U.S. economy created 410,000 jobs in May, most were temporary and/or one-in-a-decade U.S. Census jobs, with the private sector adding fewer than 50,000 jobs.
The private sector's small gain represented an unexpected reversal from March/April conditions. Therefore, investors should attach the qualifier "to be continued" to both the U.S. job market's condition and current consumer confidence levels.
The latest readings may represent a one-time anomaly or the start of a trend. But one thing is certain: Job growth will have to increase in the months and quarters ahead for consumer confidence to rise in a sustained way.
Consumer Confidence Sank in June, Thanks to the Tepid Job Market