Use access key #2 to skip to page content.

amassafortune (29.12)

Deterioration in Some Consumer-level Stats

Recs

0

May 30, 2010 – Comments (6)

According to the Consumer Metrics Institute, their weighted sector composite index continued to show deterioration in May. Reuters today, in Spending Stalls, but Confidence and Incomes Gain , confirms that the trend in May is a continuation of the trend seen in April. The Reuters article has a positive spin on confidence and income gains, but with the market steadily eroding during May, the effect of lower stock prices on these stats may lag until updates are released in June.

The Consumer Metrics Institute Weekly Personal Finance Sub-Index hit an all-time low when last recorded in mid-May. This index tracks consumer actions related to default, foreclosure, and credit counseling services. A low reading in the sub-index relates to increased activity in pre-default and foreclosure activity. Reaching an all-time low just two weeks ago is not a positive confirmation of a recovery gaining steam.

It may not be coincidental, but many unemployed are reaching their 199-week limit for benefits. The recent trend of decreased savings, cited by some as evidence of improved consumer confidence, may simply be the result of unemployed tapping savings as their benefits run out. If we see an increase in 401K and IRA withdrawals soon, that would confirm a more negative view of savings being tapped. The stats for mass layoffs show we are entering the 199-week lag time since the bulk of mass layoffs took place from October 2008 to July of 2009. The lowest level of mass layoffs during that time was Oct 2008 at 2,125 mass layoff events. Jan 2009 was the high point at 3,806. If the long-term unemployed are tapping savings as soon as benefits run out, this is not a good sign because the current trend involves mostly workers from states where the unemployment rate is less than 8.5% and benefits do not reach the 199-week limit. These would also be states where workers who have exhausted benefits have a better chance of finding a job. Thus, predictions that employment will recover very slowly are well-founded.  

6 Comments – Post Your Own

#1) On May 30, 2010 at 10:44 AM, amassafortune (29.12) wrote:

Correction - the limit on state and federal unemployment extensions is, of course, a total of 99 weeks, not 199.

Report this comment
#2) On May 30, 2010 at 6:53 PM, binve (< 20) wrote:

amassafortune,

Great post amass!

>>A low reading in the sub-index relates to increased activity in pre-default and foreclosure activity. Reaching an all-time low just two weeks ago is not a positive confirmation of a recovery gaining steam.

Exactly. The second wave is beginning in the Option Arm recasts. http://www.calculatedriskblog.com/2009/09/comment-on-option-arms.html.

The fact that stocks, but especially homebuilders, are so richly valued in light of this is a bit preposterous. Growing defaults and bankrupticies will have a huge effect on the current nacent "status quo".

I think your third paragraph is perfect. Everybody is assuming a complete recovery (stocks are still valued that way even after the recent haircut), there is too much news that is still being ignored. Thanks man!!..

Report this comment
#3) On May 30, 2010 at 9:25 PM, amassafortune (29.12) wrote:

The amount of stimulus money diverted to commercial real estate would be staggering, if known. We know $40 billion went directly to homebuilders in retro-tax breaks - not bad for an industry group that played a key role in the housing bubble. 

I cited articles before that expose the high rents being paid for census office space. It didn't hit me until later, and escaped the reporter, too, but space needed for most of the census workers was from about February 2010 - July 2010, yet many of these leases started in early 2009 and cover 24 months, or more. If the lights can be turned off in many of these locations by September, but leases (like the $41K per month in the article) extend for another nine months past the core counting duties, imagine the dollars that can be contributed to the fall campaigns.  

 

Report this comment
#4) On May 30, 2010 at 9:35 PM, topsecret09 (85.85) wrote:

   Very good post...  and It underscores what I have been screaming on these blogs for quite some time...   Red Lights are flashing In the near to Intermediate term ...  Real unemployment Is probably closer to 20%. You will not hear that number In the Main Stream Media...    TS 

Report this comment
#5) On May 31, 2010 at 7:24 AM, crystlz (54.79) wrote:

Nine post amass, I think we are going to be facing a "new normal" that is not as rosey as the MSM is portraying. One large gorilla lurking might be reduced spending by babyboomers nearing social security age.

Report this comment
#6) On June 13, 2010 at 7:56 PM, d1david (28.75) wrote:

nice post.. thanks bnive for referencing this post

Report this comment

Featured Broker Partners