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Sunday, February 27, 2011

Consumer Sentiment Report Already Out of Date

Friday morning, Feb. 25, Reuters/University of Michigan reported its Consumer Sentiment Index jumped sharply in February. This follows a Tuesday morning, Feb. 22, Conference Board report that its Consumer Confidence Index hit its highest level in three years in February. Can consumer optimism really be at a three-year high given current economic conditions?

Once again, these monthly efforts to measure the consumers' confidence in the economy are out of date. In late January, Gallup reported that economic confidence had hit a three-year high -- essentially what is just being reported by the monthly Indexes this week.

Earlier this week Gallup reported that consumers had given up all their early 2011 gains in optimism as of mid-February. And since that point, Gallup measurement shows consumer confidence has continued to deteriorate.

The decline in confidence Gallup is recording on a daily basis seems to have far more face-validity given such economic headwinds as: gas prices at $3.29 a gallon compared with $2.69 a year ago -- and headed higher with the chaos in the Middle East; the battle in Washington, D.C., over cutting federal spending; increasing underemployment; and the confrontation over spending and unions that started in Wisconsin and is now spreading to other states across the country.  

Friday, February 11, 2011

Understating Consumer Confidence

Yesterday, Gallup's Economic Confidence Index hit -14 with 45% of Americans saying economic conditions are "getting better" -- both of these measures are at their best levels since Gallup Daily tracking began in January 2008. This three-day poll result for Feb. 7-9 follows similar results for the month of January 2011 -- the best month for consumer optimism in three years.

Given these results, it seems pretty clear that the Reuters/University of Michigan Consumer Sentiment Index report showing consumer sentiment continues to improve and is approaching its mid-year 2010 high is probably right directionally -- but likely understates current consumer optimism. Given the survey's tiny sample size -- less interviews than Gallup completes in one night -- it is probably doing well to get the direction right.      

Friday, February 4, 2011

Gallup's Job Numbers Looking Good

Today's government release of U.S. job numbers for January 2011 appear to lack simple face-validity. The establishment survey is showing just 36,000 new jobs were created in January and the household survey shows 117,000 new jobs. Even with this anemic job growth in both surveys, the government reports the U.S. unemployment rate declined to 9.0% in January from 9.4% in December. The weather, the seasonal adjustments being applied, and the number of people leaving the workforce -- 504,000 in January -- combined to produce job numbers no one can anticipate or rationalize.

In sharp contrast, Gallup's 9.8% unemployment number and 18.9% underemployment rate, not seasonally adjusted, make good sense as Slate recently noted. The job situation is not as bad as a year ago -- down about one percentage point -- but still bad.

The government also reported jobless claims plummeted by 42,000 in the week ending 1/29 after surging 51,000 during the prior week. Once again, weather and seasonal adjustments are making the government's data all but useless. On the other hand, Gallup's weekly Job Creation Index -- that parallels jobless claims -- has remained essentially unchanged over the past five weeks -- as well as the past four months. Again, not as bad as a year ago, but not improving.

Maybe it's time to pay a little less attention to what the government is reporting and a little more to what a private sector firm, like Gallup, finds in its daily monitoring of the U.S. economy.

Tuesday, February 1, 2011

Unemployment and Uprising in Egypt

There are many reasons for what is happening in Egypt and the Middle East, and freedom does have a special call. However, the underlying economic conditions appear to be getting far too little attention in the media. In part, this may be due to bad data. For example, the avowed unemployment rate in Egypt is 7.6% -- lower than the government's 9.4% or Gallup measure of 9.6% for the U.S. in December.

Jobs are clearly a major force driving the current uprising and more attention needs to be focused on measuring this challenge accurately. Gallup's new measure of those employed full time for an employer provides a worldwide measure of good jobs; the kind of pressure lack of jobs can generate is being reflected by people in the streets.

Another driver of the troubles in Egypt that seems to receive far too little coverage in the U.S. -- food price inflation. As commodity prices surge, food prices go up around the world. This may be tolerable for most in the developed world, but creates real hunger in the many countries where most people's money goes toward buying food.

No matter how the crisis in Egypt is resolved, the economic factors of jobs and food prices -- and the underlying drivers of unrest -- need to be measured accurately and addressed, not just in the U.S., but worldwide.

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