Consumer confidence falling

The Conference Board, a non-profit worldwide research institution, operates a Consumer Confidence Index that is one of the key economic indicators for the U.S. economy. The index represents both consumers' perceptions of the present economic situation and their expectations for the economic conditions six months in the future. But, because the index attempts to gauge consumer psychology, it tends to be more volatile and exaggerated.\nAccording the Conference Board's study based on U.S. economic history, there is a precedent for consumer confidence falling during a national tragedy such as the attacks Sept. 11.\nThe study is supported with references to events like the Cuban Missile Crisis, President Kennedy's assassination, Iraq's invasion of Kuwait, and the Oklahoma City bombing. \nDeteriorating consumer confidence reports, coupled with record unemployment rates, are continuing to hurt the U.S. economy. \n"I think it is difficult to gauge a psychological construct like confidence," said Bill Witte, a professor of Economics.\nBut, Witte stressed that the current consumer confidence free fall has probably, "already resulted in 200,000 unemployed in transportation-related areas, plus a substantial disruption of the financial industry."\nOther transportation industries are also laying off employees. Many major auto companies' layoff reports and cost reduction plans are a result of plummeting sales figures. They represent a strong downward trend in the economy. \nFreightliner LLC, the North American truck subsidiary of DaimlerChrysler Commercial Vehicles Division, recently unveiled restructuring plans as a result of expected losses in 2001. The restructuring plans are cost saving plans, which include 2,700 additional layoffs, five percent salary cuts for hourly employees, and changes to welfare and health benefits. The job cuts have resulted in a 47 percent reduction in the company's work force.\nThe Freightliner case is typical. Many economists have no doubt the Sept. 11 attacks made a major contribution in accelerating the massive layoffs. \nDr. Sung Won Sohn, COO for Wells Fargo, said, "the economic damage from the attacks is mounting and massive layoffs will continue throughout the economy." \nSeveral important research conclusions explain why experts agree. \nAccording to the Institute for Social Research, a nationally respected University of Michigan social science research laboratory, 61 percent of those surveyed as consumers now anticipate the unemployment rate to rise to about six percent by early 2002. \nRichard Curtin, an economist from the University of Michigan, said the consumers' average anticipations make an accurate forecast for actual changes in the unemployment rate generally three quarters in advance. \nIn addition to the unemployment rate expectation, other research data indicated, "A comparably pessimistic outlook has only been recorded in the University of Michigan's Surveys of Consumers during the recessions of the 1970s, 1980s and 1990s." \nThe current seasonally adjusted unemployment rate is 4.9, the highest since September 1997.