CR Index: Slow job creation stalls economic recovery

The findings in this month’s Consumer Reports Index show that although the tide of job losses has been stemmed, the level of job creation needed to fuel a consumer recovery has not developed. Consumer Reports Employment Index stands at 48.7 for March, unchanged from February. Over the past several months the proportion of Americans who reported losing their job in the past 30-days has been on a decline, and is now stabilized at 6.0 percent, versus 5.7 percent in February.

But behind this positive finding a significant trend is emerging. In recent months the proportion of Americans starting a new job in the past 30 days has also dropped, declining to 3.5 percent in February from a recent high of 6.2 percent in September. As a result, though the index remains unchanged, there is a deepening problem in getting the unemployed back to work.

The Consumer Reports Past 30-Day Retail Index for March, which reflects the purchases consumers made in February, is at 11.1, virtually unchanged from the prior month (10.9). This number stands firmly at pre-holiday levels, indicating that consumers are hesitant to do any spending in this uncertain job market. Of all the categories that comprise the Past 30-Day Retail Index, only spending on major appliances and personal electronics showed modest gains.

The Next 30-Day Retail Index, which reflects the purchases consumers plan to make in March, is at 7.3, which is below pre-holiday levels and marks the lowest levels tracked since August 2009 (7.5).

However, we have seen some improvements in the other three indices that make up the overall index. The Consumer Reports Trouble Tracker has shown improvement over the past several months. This measure of financial difficulties faced by consumers declined to 52.3 in March from 53.4 in February, continuing a downward trend from September 2009 (68.7). The top issue faced by consumers in March was being unable to afford medical bills or medications (14.3%), unchanged from February. The other leading issue, negative changes in the terms of credit cards, continues to be an important component affecting consumers (10.1%), though it’s down from its November high of 15.1%.

Consumer sentiment is up from a year ago versus today, but the overall gain has been modest (41.9 versus 44.8, respectively). The level of stress consumers feel they are under is down compared to prior months. The Consumer Reports Stress Index is now at 57.7, down from 59.9 in February and 63 in December.

“We believe that improvements in both the Employment Index and a return to solid, sustained improvement in the retail indices, along with a continued decline in the economic difficulties faced by consumers will signal the start of the consumer recovery,” says Ed Farrell, a director of the Consumer Reports National Research Center.

The Consumer Reports Index, conducted by the Consumer Reports National Research Center, is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,258 interviews were completed (1,008 landline phones, 250 cell phones) among adults aged 18+. Interviewing took place between February 25-28, 2010. The margin of error is +/- 2.8 points at a 95% confidence level.