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The Inexplicable American Consumer Takes A Breath

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Wolf Richter   www.testosteronepit.com

Consumer optimism has been rising from the horrid multi-year lows in August and has reached the highest levels since, well, May. It whipped hope into a froth. Rising confidence would pump up consumer spending, which would pump up everything else. But the inexplicable American consumer, the toughest creature out there that no one has been able to subdue yet, had other plans.

The Thomson Reuters/University of Michigan consumer sentiment hit 74.0 today, up from 69.9 in December, up for the fifth month in a row since the August lows. Similarly, the Conference Board Consumer Confidence Index (December 27) rose to 64.5, a big jump from the multi-year low of 44.5 in August. And Gallop’s Economic Confidence Index (January 10) rose to -27 from its low of -54 in August.

Consumer confidence is an ugly story. The Conference Board Index peaked at around 140 during the period of 1999 to 2001. Back then, it was fun being a consumer. Everyone had jobs, money markets actually made money, most yields were higher than inflation, stocks were shooting up, and even when they were crashing, everyone knew they’d reverse soon and make new highs. Then consumers discovered reality. Confidence began to unravel with sharp drops from 2001 to 2003, followed by mild upswings from 2003 to 2007, and a collapse by early 2009, when it dipped into the 20s. Since then, it has been rising, reaching the 70s in early 2011. But over the summer, it collapsed again to 44.5.

August was a horrid month for confidence, and yet, the inexplicable American consumer pulled out a stack of credit cards and went shopping ... though real income (adjusted for inflation) continued its morose decade-long decline—that it parallels the decline in consumer confidence over time is probably not a coincidence. The shopping spree lasted through Thanksgiving.

In December, plot twist. The trend reversed. Though consumer confidence shot up, the toughest creature out there took a deep breath. Retails sales ex-autos declined from November by 0.2%. Sales of electronics dropped by 3.9%, online sales edged down 0.4%, and sales in malls were down 0.8%. Including autos, which had a good month, sales rose only 0.1%. Out the window are the projections for a strong end of the holiday season. And it could be the beginning of another downdraft.

Gallup sheds some light on this from a different angle. With a poll of open-ended questions, it tried to determine what worried Americans most about the national economy. Top three: “Jobs/unemployment” 26%, “National debt/Federal budget deficit” 16%, and “Continuing economic decline/Economic instability” 10%.

Jobs, still. Despite ceaseless rhetoric from the White House about the millions of jobs that it had created somewhere, the job market has improved only slightly. The BLS’s Employment Population ratio, which measures the percentage of people age 16 and older who have jobs, is the least corruptible employment number the government makes available. At 58.5%, it's only a fraction above the 58.1% from August, which was the lowest reading since 1983, and it’s far below its peak of 64.7% in April 2000.

In California, the numbers are similar. Peak employment occurred in January 2008, according to the BLS, when 17,023,322 people were working. The trough occurred in August 2011—yup, just five months ago—when only 15,830,729 people were working. However, the unemployment rate has been improving for a year. The difference: statistical adjustments. Not jobs created. For more on the debacle of declining incomes and disappearing jobs, read.... The Shriveling Middle Class in California.

But White House rhetoric works: 34% of the respondent in the Thomson Reuters consumer sentiment survey had heard about the improving jobs situation. That’s up from 21% in December, and a record in the history of the index. But rhetoric alone can’t make up for a tough job market and falling real wages—and falling real wages are now part of the official White House dogma, according to a White House paper. But please don’t tell the rank and file! Read it quietly.... When The White House Touts Falling Wages.

 

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Sun, 01/22/2012 - 22:10 | 2087405 arg
arg's picture

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Sat, 01/14/2012 - 14:31 | 2064719 geno-econ
geno-econ's picture

Auto sales holding up due to temporary relaxation of requirements for obtaining loans which automakers lobbyists pushed for. We have not learned that sub- prime loans are counterproductive.  So what will be the next "quick fix trick" ? Try saying "quick fix trick" quickly three times and you come up with a description of Ben Bernenke !

Sat, 01/14/2012 - 14:23 | 2064705 847328_3527
847328_3527's picture

In a drastic move to prepare for the loss of millions of dollars in state redevelopment funds this year, Oakland will hand layoff notices to 1,500 city employees next week, and 200 will eventually be dismissed, city leaders said Thursday.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/12/BASM1MOL5B.DTL#ixzz1jSTLSCBB
Sat, 01/14/2012 - 12:58 | 2064595 YesWeKahn
YesWeKahn's picture

You guys still don't understand it. It's the foreigners who were buying all the luxary stuff in the US. They are a lot of cheaper than in their own countries.

Sat, 01/14/2012 - 12:35 | 2064577 sara29
sara29's picture

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Sat, 01/14/2012 - 11:46 | 2064520 Eireann go Brach
Eireann go Brach's picture

Oweebieowabbama fuck off back to Kenya!

Sat, 01/14/2012 - 10:19 | 2064464 Hannibal
Hannibal's picture

Hah yeah, the power of mass media and positive thinking or,....the allegory of Plato's Cave?

Sat, 01/14/2012 - 10:16 | 2064462 Bindar Dundat
Bindar Dundat's picture

The American consuming class is not even close to being out of cash.   I would never underestimate the  money sitting in the accounts of 10-15%  of the American population which in turn  repreresents about 20% of all global wealth.   The U.S.A maybe be in decline but my goodness it has a long way to go to crash and burn.

(Sarc On) Now if we can only get OBAMA reelected the Government could really look after us.  (Sarc off)

 

www.larryobrien.net/my-worst-fear

Sat, 01/14/2012 - 13:20 | 2064621 Ghordius
Ghordius's picture

I like that part most in the larryobrian blog: "After it was decided to allow Freddie Mac and Fannie Mae to buy all the houses that were in arrears;  the Federal Government quickly owned over eighty-five percent of all residences in America.  In a brilliant political move, these houses were then rented back to the original owners at rates ranging from zero to a few hundred dollars a month and the public was over joyed at their good fortune.  Who needed to own a house when the Government was literally giving them to you to use for free.    The rest of the real estate market collapsed quickly and within two years the Government owned all housing in America. It was a great time to be an American: the Government was finally looking after us."

What strikes me is that the gov, at this stage, could do worse then charge rent for property "in limbo" where the "squatters live for free" - and who knows, it could generate a serious free market for rential - young families would be thankful. But it is against the concept of a "nation of homeowners".

Sat, 01/14/2012 - 09:23 | 2064429 wonderatitall
wonderatitall's picture

THEY TOK MA JRRRRRRRB...

THERE IS A BUSH...

OBAMA TAKES ANOTHER VACATION AND BLAMES BUSH...

MARIE OBAMA SAYS," TAKE THAT CAKE FROM THE PROLES"...

BUSH ACCEPTS BLAME FOR EVERYTHING UNDER THREAT FROM OBAMA AND UNION GOONS

HEADLINES AT MSNBC

 

Sat, 01/14/2012 - 09:10 | 2064418 mendolover
mendolover's picture

Yeah I'm spending my ass off.  But I'm not spending my money on anything that the average sheep would be interested in.  ( ;

Sat, 01/14/2012 - 08:46 | 2064407 ThisIsBob
ThisIsBob's picture

Is anybody bundling those car loans and selling tranches? 

 

 

Sat, 01/14/2012 - 10:22 | 2064466 Bindar Dundat
Bindar Dundat's picture

Yes we are but with every million you invest you get a share in two " moist"  acres in sunny florida  and part of a bridge in Brooklyn.... And it's AAA+ rated too. 

Sat, 01/14/2012 - 07:47 | 2064383 mrdenis
mrdenis's picture

You would have a better chance of seeing a snowball fight in hell ,before Americans stop spending .....http://i.imgur.com/HpuVM.jpg

Sat, 01/14/2012 - 12:25 | 2064571 Kayman
Kayman's picture

Yeah, ripping the panelling off the walls to keep the furnace burning.

 

Sat, 01/14/2012 - 04:56 | 2064308 TheMerryPrankster
TheMerryPrankster's picture

De consumers broke? Who coulda known!!

this rocket is going to quiver in it's silo until 2024, the economic recovery has been an illusion produced by Fed intervention and treasury bailouts. The rocket won't burn, the tanks are empty,siphoned by Greenspan to inflate the housing bubble, which was used to reinflate the dot com bubble.

Check in the control tower, there's a big fat IOU that is backed by underwater mortgages on abandoned homes. The quintessential "toxic asset" aka debit.

There are millions of them from coast to coast and the depression is creating more non-perfoming mortgages monthly. It don't take a rocket scientist to figure out this economy is out to launch or is that lunch?

 

Sat, 01/14/2012 - 04:52 | 2064303 ebworthen
ebworthen's picture

With month after month of fudged BLS statistics and Mass Media's incessant "Recovery" headlines and dialogue; the propaganda has taken over some people's common sense.

If you have a job and some disposable income, or even if you don't and need to use the credit card, if TPTB say "Recovery" and other soothing words and convince people that things will go back to "normal", they will spend and/or in a consumer sentiment survey be "optimistic".

Sat, 01/14/2012 - 12:22 | 2064567 Kayman
Kayman's picture

There is growth in propaganda, there is growth in government.  The 1% and the mandarins are insulated from the grunts.

The skim and churn game continues, while the engine of the economy has been scrapped and shipped to China.  Backhaul rates being cheap and all...

Sat, 01/14/2012 - 02:55 | 2064261 HungrySeagull
HungrySeagull's picture

Take a look at the SNAP Crowd on the 1st of each month.

Then take a look again towards the end of the month.

There will be a difference in the mood. And it is not pretty.

 

Whatever cash anyone has left is being held. Not spent unless necessary.

Sat, 01/14/2012 - 11:16 | 2064501 Oleander
Oleander's picture

I do not know about all states but in MA. the SNAP and Cash assistance are deliver to debit cards according to Social Sec. #.

Those ending in 0 on the first but those ending in 9 get benifits on the 13th.  So the $$ are spread out thru out the month instead of all everyone getting it at once.  This must help keep grocers in bussiness as they can plan on shoppers through out the month.

 

Sat, 01/14/2012 - 01:39 | 2064213 RockyRacoon
RockyRacoon's picture

This story isn't over yet.  There is something missing from the puzzle and I'm not smart enough to figure it out.  The numbers just don't match up.   Spooky... and ominous.

Sat, 01/14/2012 - 10:59 | 2064483 LongBallsShortBrains
LongBallsShortBrains's picture

Tyrone still selling rocks, Hector still selling dime bags. Moweesha still selling her biscuit on the street. Maria cleaning houses for whitey.

Go short everything and long the black market! It helps build confidence dontchaknow!

Sat, 01/14/2012 - 01:10 | 2064191 non_anon
non_anon's picture

a rattled breath

Sat, 01/14/2012 - 00:53 | 2064177 Seasmoke
Seasmoke's picture

still dont hear it mentioned nearly enough.......people are not paying the mortgage (and more and more are finally waking up that the house has been PAID for), so they have lots of money to spend !....

Sat, 01/14/2012 - 09:49 | 2064433 chunga
chunga's picture

Senate Bill 6199 was referred to the State of Washington Judicial Committee on Jan. 13, 2012.

Senate Bill 6199

23 (ii) A declaration by the beneficiary made under the penalty of perjury stating that the beneficiary is the actual holder of the promissory note or other obligation secured by the deed of trust shall be sufficient proof as required under this subsection. A violation of this subsection (7)(a)(ii) is a class C felony as provided in RCW 28 9A.20.020 and 9A.20.021.

These bastards are having difficulty foreclosing on people who aren't paying. When people who ARE paying start questioning this shit...oh boy.

Go ahead, if you have a mortgage ask your "lender" who the holder of your Note is; and where is it. I dare ya.

They'll tell you to fuck off.

[edit] Washington residents: if you support this Bill call 800-562-6000 and let them know.

Sat, 01/14/2012 - 01:36 | 2064211 frostfan
frostfan's picture

Some stories are out there.  The WSJ wrote a story earlier this week about how new car sales are being spurred by finance companies who give loans to people who have defaulted on their mortgages but think will most likely make car lease payments. 

Sat, 01/14/2012 - 09:33 | 2064436 krispkritter
krispkritter's picture

Then it would seem the next step is people not paying their mortgages being forced out of their homes and living in their cars.  Then they stop paying their 'mortgages' again. What a sick system, 'Cash for Clunkers' and Gov Motors, etc. shoveling cars onto people who don't need them but are so indoctrinated in the system that they keep jumping at that "0%" loan even though the interest is already built into the price. Increasing their insurance costs and adding to their registration/tax fees, for what? This then takes you back to the articles BK and RM posted on education. It really does come down to who's curriculum gets pushed; "Sheople 101" by the NWO whores or "Independent Thinker" by Concerned Citizens. I'll take Ron Paul's view and say shutter the DoEducation ministry and make home schooling as easy to do as possible and hell, subsidize it by letting them keep their tax dollars shoveled into the local government's school boards. Then let's see what the next generation looks like.

Sat, 01/14/2012 - 12:10 | 2064546 Kayman
Kayman's picture

GM morphed into a mortgage company (Dietech.com), pumped the crap out of the mortgage market, then walked away from THEIR mortgage.

Now GM is Allied. pumping the crap out of car loans.

Ultimately, there is one private sector taxpayer carrying the load, and one printer making certain his buddies have the loot to get out of Dodge.

Sat, 01/14/2012 - 10:48 | 2064478 Cloud9.5
Cloud9.5's picture

Always buy a new car just before you default.  The bankruptcy court won’t touch it if you are upside down in your note. In these times you may get credit card applications a month after the discharge order, but it takes seven to ten years to clear up some of the credit issues and a new car loan may be difficult to come by.  It’s a good idea to buy a truck to have something to haul your stuff with when they kick you out of your house.

Fri, 01/13/2012 - 22:38 | 2063966 DaylightWastingTime
DaylightWastingTime's picture

better keep the receipt on that record breaking buy of a lifetime.

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