The Washington Post wrote yesterday:
Darkening consumer confidence and plunging prices combined with a generally dismal outlook to dampen hopes for a quick economic recovery…
The decline itself is less meaningful than the fact that economists expected consumer confidence to rise in August. This means the experts underestimated the pessimism of American consumers, which helped send the stock market down Friday…
The consumer confidence survey contained two notable findings: the lowest number of consumers in the survey’s 60-year history said their personal finances are improving. Many said their net wealth is being hammered by unemployment, shorter hours and diminutive wage gains.
Of course, the government has thrown trillions at the too-big-to-fail banks, but has done next to nothing to help the struggling American people.
In the world of cheerleading corporate talking heads, the following obvious statement by the chief investment officer of $216 billion dollar investment firm Russell Investments (Stephen Wood) stands out as a breath of fresh air:
I think you’re going to need to see a material stabilization in labor markets before you get meaningful and stable consumer confidence.
Summers, Bernanke and Geithner can prop up the stock, bond and other markets until the cows come home, but if unemployment is still rising, consumers will not be confident, they will spend less, and – because consumer spending equals 70% of the economy – the economy won’t really recover.