Jobless rate inches up

The unemployment rate ticked up another one-half point in May to 5.5%, up from 5% in April. This leaves about 8.5 million people unemployed with teenagers and blacks experiencing the highest jobless rates at 18.7% and 9.7%, respectively.

The bright spot in the employment picture was health care, which picked up about 34,000 jobs in May. Construction, manufacturing, retail trade, and temporary help services all continued to post employment declines.

“Hiring looks to be a bit cooler this summer,” says Jonas Prising, president of Manpower North America, viewing the results of the latest Manpower Employment Outlook Survey. Nearly three-fifths of employers surveyed are expecting no change in their hiring pace within the third quarter, July – September. Twenty-six percent of employers expect to increase their staff levels and 10% of surveyed employers expect to see a decrease in jobs, leading to a 16% net employment outlook.

Consumer confidence, measured by the Conference Board’s Consumer Confidence Index, hit a 16-year low in May, to an index reading of 57.2, down from 62.8 in April. The Consumer confidence index hasn’t been this low since October 1992 when it registered 54.6. The Index started its current downward slide in September when it dipped below 100, and has been steadily dropping since. “Weakening business and job conditions coupled with growing pessimism about the short-term future have further depleted consumers’ confidence in the overall state of the economy,” said Lynn Franco, director of the Conference Board’s Consumer Research Center. “Consumers’ inflation expectations, fueled by increasing prices at the pump, are now at an all-time high and are likely to rise further in the months ahead. As for the short-term outlook, the Expectations Index suggests little likelihood of a turnaround in the immediate months ahead.”

Declining employment and fewer job prospects means income growth is restrained, leading to more reserved consumer spending. Currently, consumer spending is barely keeping up with inflation. Extraordinary increases in gas and food prices are curbing discretionary spending which has hit the retail sector particularly hard.

According to Richard Curtin, director of Reuters/University of Michigan Surveys of Consumers, consumers are concerned about their future income, job prospects and the future route that gas and food prices will take. Consumers are choosing to put buying plans for items such as household furniture and home electronics on hold.

To tread water or do better, producers and retailers will have to find ways to make their products enticing, must-haves and needed, not just wanted items.