Economists already had believed confidence will remain weak for at least another year because of stubbornly high unemployment. But a batch of economic data – from disappointing job figures in May to dismal housing numbers – is increasing worries that the road to recovery could be rockier than anticipated. Amid such concerns, the Dow Jones Industrials has fallen 9.5 per cent since late April.
“We're concerned about the strength of the economic recovery from here,” said Richard Hastings, macro and consumer strategist with Global Hunter Securities.
A key housing index released Friday showed that home prices in April rose for the first time in seven months as government tax credits bolstered the housing market. But the rebound may be short-lived now that the incentives have expired. The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday posted an 0.8 per cent gain. It had fallen in each of the past six months.
Overall, however, a recent batch of housing data released last week signaled a renewed housing slump that may threaten the broader economy. The Commerce Department reported on Wednesday that sales of new homes collapsed in May, sinking 33 per cent to the lowest level on record as potential buyers stopped shopping for a home as government tax credits expired. That came a day after a report showed that sales of previously owned homes fell unexpectedly in May.
The Commerce Department announced Monday that Americans spent a little more in May but not enough to accelerate the economic recovery. Consumer spending rose 0.2 per cent last month after no change in April. But personal income was up 0.4 per cent, indicating consumers are still wary and choosing to save money.
A key issue is jobs. The Labor Department is expected to report on Friday that employers eliminated 110,000 jobs in June, and the jobless rate is expected to tick up slightly to 9.8 per cent, from 9.7 per cent in May, according to economists surveyed by Thomson Reuters. That follows a bleak report in May, which showed employers added 431,000 jobs but the vast majority were temporary census positions.
Retailers had a surprisingly solid start to the year as consumers felt better as their stock portfolios rose, but since April, business has slowed. Hastings believes the sluggishness continued into June. He believes sweltering heat in this past month wilted sales of summer's trendy fashions as consumers stuck to buying the basics like shorts and tank tops to keep cool. He also cited a slowdown in revenue in big-ticket items.
The Conference Board survey is based on a random survey of consumers sent to 5,000 households from June 1 to June 22.
The survey showed that consumers' assessment of the labor market was less than favorable. Those claiming jobs are “hard to get” increased to 44.8 per cent from 43.9 per cent, while those saying jobs are “plentiful” decreased to 4.3 per cent from 4.6 per cent. Consumers polled were also much less optimistic about future job prospects.
With files from The Associated Press
