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Thursday, March 31, 2011

Gallup’s Job Creation Index Fell Last Week

During the week ending March 27, Gallup’s Job Creation Index (JCI) fell sharply returning to a score of 10 -- the same as it was for most of January. Over the prior two weeks, the JCI had been at multi-year high points of 13 and 14. While this could be a one-week break in the trend, it seems more likely to be the result of growing global and domestic economic uncertainties -- particularly given that the JCI is below its 2011 weekly low of 10 in Gallup’s most recent three-day surveys.

The JCI is constructed using employee reports of whether their companies are hiring or firing. Last week, 30% reported that their companies were hiring and 20% letting people go -- the difference providing a JCI score of 10. This decline came on both sides of the measure as the percentage hiring fell from 32%, while firing increased from 18% during the prior week.

In the past, Gallup’s JCI has been generally predictive of jobless claims -- particularly the four weekly moving averages. While they are inversely related, both the government’s weekly jobless claims report and Gallup’s JCI have improved during 2011 as the percentage of companies letting employees go has declined and hiring has improved on the margin. This past week the government’s jobless claims increased as expected given the decline in Gallup's JCI.

More importantly, the tumbling JCI may signal that America’s businesses -- like the American consumer -- are losing their early 2011 optimism and pulling back in their hiring efforts, at least in the immediate future. While this change in trend is too recent to be picked up in government’s March jobs report, it does suggest another reason for caution when interpreting both the ADP’s 201,000 private sector job growth report, as well as the job growth reported by the government on Friday -- they may already be out of date.

Tuesday, March 29, 2011

Consumer Spending Takes a Tumble

Gallup's self-reported consumer spending declined to an average of $56 per day during the week ending March 17 -- essentially matching the lows of 2011. Weekly spending increased steadily during February and peaked in the week ending March 6 at $73 -- a paycheck week. Since that time, spending has been trending generally down.

The recent decline in spending is consistent with a lagged response to the drop in economic confidence Gallup has recorded since mid-February. It also aligns with consumers pulling back on their spending in the face of surging gas and food prices, budget battles in Washington, D.C., a housing decline that has not bottomed out, continued unrest in the Middle East, financial problems in Europe, and a growing tragedy in Japan.

The Fed seems capable of driving Wall Street and commodity prices higher no matter what happens. However, it seems incapable of providing benefits to Main Street as economic growth slows and prices head ever higher.

Monday, March 28, 2011

Gallup's Economic Confidence Index Continues to Decline

Gallup's Economic Confidence Index continued to worsen last week as it fell to -33 in the week ending March 27, 2011 -- 44% of Americans rate current economic conditions "poor," and 65% say the economy is "getting worse." Americans are now more pessimistic about the future direction of the economy than they have been at any time in the past two years -- the week ending March 29, 2009.

This suggests that the Conference Board will report Tuesday morning that its Consumer Confidence Index declined in March, consistent with Tuesday's decline in the Consumer Sentiment Index. More importantly, Gallup's results suggest consumer optimism continues to decline, even after these two other surveys were completed and out of the field. This stands in sharp contrast to a year ago when consumers were becoming more optimistic as spring got underway.

While Wall Street has been largely able to ignore the chaos in the Middle East, the triple disaster in Japan, and state and federal budget battles, consumers have not been able to do likewise. High gas prices, surging food prices, and a continuing lack of jobs are challenges not-so-easily ignored by the average American consumer. And, something that does not bode well for the economy in the months ahead.

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