A dip in consumer confidence in December is tipping economists off to a disheartening trend in the U.S. population's view of the national economy.
Despite continued positive monthly figures for new jobs during the month, the confidence index dropped three points, to 98.7. Consumers, it seems, are disturbed by the headlines about layoffs and the meager pay raises they've received.
"The past year has been a consumer market, but most people are far more willing to believe bad news than good news," said Ken Goldstein, chief economist for the Conference Board.
This shaky spending morale is translating into unfavorable news for the housing market, says John Tuccillo, chief economist for the National Association of Realtors.
Every area of the country is going to be a little weaker than 1996, he declared, adding: "The housing market will be a real tug of war, "with side one the ambiguous job picture, and side two low interest rates."
Because of their perceived uncertainty about their employment future, people are not moving up to as expensive a home as they used to, Mr. Tuccillo said. The trade-up rate continues to be good, he asserted. "The problem is what people are trading up to."
Home-value increases are also hampered by negative consumer attitude, Mr. Goldstein said.
This should translate into weakness in the housing market in the South, according to Mr. Tuccillo.
High-profile layoffs are scaring consumers despite the fact that new jobs are available. "If AT&T cuts 40,000 jobs, that fixates the country," Mr. Goldstein commented.
And pay increases have not come as often or been as large as the job force was hoping, he said. "The public is going through a down-sizing of expectations," Mr. Goldstein declared. "It's like mourning after someone has died. It takes longer than you think it will."
One "silver lining" to the cloud of uncertainty governing the population's spending habits, according to Mr. Goldstein: At one point they will "wake up and realize that the sky is not falling."
Mr. Goldstein predicts that 1996 will be the year that "the fever breaks" and consumers realign their spending habits with the economic reality surrounding them.
Mr. Tuccillo said the Midwest and the Rust Belt will see good growth in 1996.
