UF Economists: Job Worries And Stagnant Wages Sober Consumers

June 25, 1996

GAINESVILLE — Florida consumers regained some confidence in the economy in June, but job worries and stagnant wages stand to curb their enthusiasm, say University of Florida economists.

The preliminary Florida Consumer Confidence Index rose two points in June to 90, after dipping three points in May, said Chris McCarty, survey director of UF’s Bureau of Economic and Business Research, which conducts the monthly consumer survey.

“Somewhat surprising is that, in our sixth consecutive year of growth, confidence is not higher,” said Dave Denslow, a UF economist. “In 1988, another election year, after a similarly long spell of growth, confidence averaged 96, not 90 where we are this year. Job worries and slow wage growth will keep consumers cautious.”

This month’s rise in confidence was driven by an increase in consumers’ perception of their personal financial situation now and over the next year, McCarty said.

“The rise in confidence comes at a time when the country is nearing full employment, despite the rash of downsizing that has occurred over the past two years,” he said. “But there are some indications that even though consumers are employed they are experiencing wage stagnation.”

Although long-term interest rates are rising, which is starting to affect the housing market nationwide, the Federal Reserve’s decision to put off an increase in interest rates has helped consumers remain optimistic, McCarty said.

“Some economists are still concerned about record levels of consumer debt putting the brakes on consumer spending,” he said. “The fear is that once interest rates go up we may see a serious drop in consumer spending.”

The consumer survey respondents who were positive about their current and expected financial situations cited better money management or improved business performance as the main reason for their economic confidence.

Tampa was the most optimistic of the three regions for which the survey calculates results individually. It realized a four-point gain from May to register 96. The rise was fueled by a dramatic increase in consumers’ expectations about their financial situation a year from now and whether this is a good time to buy big ticket consumer items.

Elsewhere, consumer confidence inched up two points in Orlando to 95 and fell one point in Southeast Florida to 89.

Floridians who are employed gave mixed reports about business conditions for June. The share of respondents claiming business was higher than at the same time last year declined two points to 46 percent. At the same time, the share who expect extra employees to be hired at their workplace increased from 30 percent in May to 35 percent in June.

The Florida Consumer Attitude Survey is conducted every month by the bureau. Respondents are all 18 or older and live in households telephoned through random digit dialing. The preliminary index for June was calculated from 862 responses. Numbers for prior months are based on about 1,000 responses. The margin of error for the index is almost three points. Regional results are subject to sampling error of almost four points.

The index is patterned after the University of Michigan’s confidence index for the United States. Both indexes use 1966 as the base year. Numbers below 100 indicate that consumers are less confident than they were in 1966, when the index was 100.