The Thomson Reuters/University of Michigan’s consumer sentiment index plummeted to 66.5 from 76.0 in June. That was below market expectations for 74.5, according to the news service. The number is at its lowest point in 11 months
The figure is close to the lows reached during the worst part of the recession, and demonstrates that the average American does not think the downturn is over. A recent Bloomberg survey showed that 70% of those polled believed that the national economy is still in a recession.
The major cause of the drop is almost certainly the intractable unemployment that has plagued the economy for two years. The joblessness problem gets worse as each month passes and a larger number of people are out of work for six months or longer, although total unemployment is steady at just below 10%.The economy is likely to do no better than move sideways for the balance of the summer. A great deal of the momentum from the $787 billion stimulus package has begun to fade if it ever existed at all. Congress has rejected any and all calls for a “second” stimulus which would be targeted at increasing employment and extending unemployment benefits.
The second quarter was weak economically and so far the third does not look any better. That leaves the holiday season as the only hope for salvaging what has become as close to another recession, at least in the minds of those whose finances are weak, which is almost everyone.
Douglas A. McIntyre
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