Florida's consumer confidence dips as bleak employment picture persists
July 28, 2009
GAINESVILLE, Fla. — The state’s double-digit unemployment rate is likely to blame for a two-point drop in Florida’s consumer confidence in July to 67, despite good news about housing prices and the stock market, a new University of Florida survey finds.
“We had expected consumer confidence to fluctuate between the upper 60s and low 70s for the next few months, but given the current economic climate, this decline comes as a bit of a surprise,” said Chris McCarty, director of UF’s Survey Research Center at the Bureau of Economic and Business Research.
Consumers’ increasing pessimism about long-term economic conditions and the outlook for their personal finances account for most of the downturn, McCarty said. “Given that the stock market is now up for the year and housing is showing strong signs of stabilizing, I would attribute much of this decline to the news about employment,” he said.
Florida’s unemployment rate now stands at 10.6 percent, McCarty said. However, most economists believe the actual figure is higher because many Floridians have at least temporarily given up looking for work until the economy fully recovers from the recession, he said.
Rehiring is among the last things businesses will do, McCarty said. Typically, the unemployment rate continues to rise during economic recoveries until companies see positive signs in the business environment that appear to be long lasting, he said.
“Given the massive structural readjustment to U.S. businesses over the past two years, getting back to full employment will no doubt take longer than was the case with past recessions,” he said.
The positive trends in the stock market and housing stand in sharp contrast to the bleak job market picture, he said.
After falling below 6,500, the Dow Jones Industrial Average is now up from where it was at the beginning of the year, McCarty said. There is speculation whether the rally will continue as the federal infusion of economic stimulus money wears off, but for now it appears stable, he said.
Housing in Florida improved again in June overall with the median price of a single-family home increasing once again, to $148,000 from $144,400 in May, McCarty said. “While still 43 percent off the peak median price reached in June 2006, prices appear to be increasing, which will help solidify perceptions of wealth,” he said.
Four of the five components that make up the index fell in July. The largest drop was in expectations of U.S. economic conditions over the next five years, which plummeted nine points to 72. Expectations of personal finances a year from now fell five points to 79, while perceptions of personal finances now compared to a year ago fell three points to 43. Expectations of U.S. economic conditions over the next year fell one point to 65. The only component to rise was perceptions as to whether it is a good time to buy big-ticket consumer items, which jumped seven points to 75.
“Moving forward, we predict consumer confidence may gain a little in the next month or two given this big of a drop,” McCarty said. “Although there is certainly still room for a decline, the record low was 59 [in June 2008] during the worst of the housing crisis and weekly economic horror stories about the largest of financial institutions failing.”
The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for July was conducted from 422 responses. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year.