Consumer Confidence Fell Again in July

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It's been a rough summer for the American consumer. After a big 8.4 point drop in June, confidence has fallen 3.9 points further in July, according to the Conference Board. In the last two months, all of the positive sentiment that grew this spring has been erased. This is grim news for the labor market.

Here's a chart showing a year's worth of confidence readings:

conference board 2010-06.PNG

As you can see, the only month in 2010 where confidence was below the current level of 50.4 was February. The Conference Board's report says that its other measures of sentiment declined in July as well. Its Present Situation Index fell to 26.1 from 26.8, and its Expectations Index dropped to 66.6 from 72.7. Clearly, Americans view of the economy is getting worse, not better.

Here's Lynn Franco, the Director of The Conference Board Consumer Research Center, on July:

"Consumer confidence faded further in July as consumers continue to grow increasingly more pessimistic about the short-term outlook. Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves. Given consumers' heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season."

The perception of weak consumer demand is the driving cause of why businesses have been slow to rehire workers this year. If confidence is getting worse, instead of better, then job growth will likely continue proceed at a crawl.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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