Despite a better-than-expect jobs report for September, businesses and consumers overall remain pessimistic about the direction of the U.S. economy, and that mindset will in part push down freight volumes for the balance of 2011.
“We still expect to see a seasonal increase in freight as we head into the holidays, but it’s going to be less than normal,” Chris Brady, president of Commercial Motor Vehicle Consulting (CMVC), told Fleet Owner.
“The issue is that the economic environment is still soft and sluggish to retailers,” he explained. “Consequently, they won’t build up as much inventory heading into the holiday season, and that results in less cargo than typically expected during what’s nominally the peak season for freight.”
In addition, only 14% of businesses polled by PNC said proposed tax incentives by the Obama administration will positively impact their hiring plans, as owners’ expectations for sales and profits are significantly lower than last spring – ushering in renewed pessimism compared to six months ago, noted Stuart Hoffman, the firm’s chief economist.
“As business confidence plunges to a near-record low, the concern is we will scare ourselves into a double-dip recession, thus turning it into a self-fulfilling prophecy,” he added. “These findings support our forecast that the economic recovery will persist, but the slow pace of growth will be insufficient to make any progress in lowering the nation’s painfully high unemployment rate in the coming year.”
And though the U.S. Dept. of Labor reported that total nonfarm payroll jobs grew by 103,000 in September, Kathy Bostjancic, director of macroeconomic analysis for The Conference Board, said that merely confirms the outlook that U.S. economic growth remains sluggish.
“After four straight months of very little job growth, conditions improved a little in September. While it may help us to just barely escape a recession call, the gain in jobs and incomes is likely too little to blunt consumer pessimism,” she explained.
“The main problem is that demand is simply too weak to support more robust job growth [of] more than 125,000 jobs per month,” Bostjanic pointed out. “Employers are not going to step up hiring unless demand picks up [and] consumers are not going to spend more until employment strengthens.”
“Jobs remain the biggest driver of confidence, and growing worries about employment security are affecting the consumer outlook,” added Tom Porcelli, chief U.S. economist at RBC Capital Markets.
The RBC Consumer Outlook Index dipped to 39.2 in October, down one point from September, meaning confidence is below the level of a year ago (41) and also below the average level during the recession (40.2).
Worries about jobs is weighing the most on U.S. consumer sentiment, Porcelli noted, with one-in-three (34%) saying they are currently concerned about losing their job, up six points from last month. Nearly half (46%) of consumers said they or someone they are close to has lost a job in the last six months, up nine points from last month, the firm’s survey found.
But although global economic issues may not be leading consumer sentiment, most Americans (59%) in RBC’s poll are following developments in the European financial crisis. In fact, RBC’s survey found more than one-third of Americans overall (36%) said that crisis has worsened their confidence in the U.S. economy.“Our survey shows you can't overlook the impact the European crisis is having on US confidence,” Porcelli warned. “We are quite literally layering more worries into an already fragile