Obama's Consumer Confidence Sinks in August

by John M. Curtis
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Copyright September 1, 2011
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            Plunging to the lowest levels in two years, the Conference Board’s consumer confidence index dropped to 2009 levels, signaling problems ahead for consumer spending.  U.S. consumers fretted about the jobs picture, worried that the 9.1% national unemployment rate could stay the same or go up.  Obama’s Achilles Heel has been the economy, not performing the way he expected after Congress approved Feb. 13, 2009 his $787 billion federal bailout bill.  While there’s some evidence that the bailouts helped keep some state workers employed, there’s more doubt about whether the whopping stimulus package added private sector jobs.  When President Barack Obama passed March 22, 2010 his Health Care Reform Bill, it spooked markets and scared employers about hiring new workers.  Barack’s GOP critics thought it was best to focus on job creation, not health care.

            No one knows for sure what will happen when the government rolls out Barack’s national health insurance bill in 2014.  Expectations range from economic disaster to the biggest boom to hit the economy since the California Gold Rush.  Adding 40 million more health care subscribers requires a massive expansion of the health care industry, potentially adding millions of new jobs to the economy.  While most economists have no crystal balls, it’s not rocket science to figure that the system will have to expand the existing system.  Between now and then, Barack still confronts stiff headwinds during an election year where there’s palpable fear in the consumer marketplace.  Next week’s much anticipated jobs speech hopes to change today’s doom-and-gloom into a more optimism.  Obama must do more than talk about tax incentives, infrastructure spending or extending unemployment benefits.

            Obama’s lack of real leadership on the economy could upend his chance for a second term.  Next week’s job speech must talk about how lucrative American companies, like Apple Computer, can return manufacturing or at least assembly of its popular line of i-products back to the United States.  Voted the most admired U.S. company by Fortune Magazine four years in row, Apple must do more than make profit for its shareholders:  It must create American jobs.  Without more U.S. employment, Apple can’t expect American consumers to keep buying its products.  “Consumer confidence deteriorated sharply in August, as consumers grew significantly pessimistic about the short-term outlook,” said Lynn Franco, director of the Conference Board Consumer Research Center.  When Obama speaks to the nation about jobs, he must do something bold.

            When Obama speaks next week about jobs, he’s going to have to give the country the bitter pill, insisting that foreign manufacturing or assembly must return to the U.S.  Publicly-traded companies must accept lower profits to create jobs stateside.  Foreign manufacturers, too, must accept what the auto industry has accepted for years, namely, opening up factories in the U.S.  Following next week’s speech, Barack must call a White House jobs summit, inviting elected officials and key members of the business community.  Instead of looking to slash government spending, the Congress should be looking to add untold numbers of new jobs to generate more tax revenue.  Tea Party favorite GOP presidential candidate Texas Gov. Rick Perry wants to shrink the federal government so much that it provides limited government services.  Voters must decide what function they want government to play.

            To give publicly traded companies what they need to grow, the stock market can no longer have the rug pulled out from underneath it by unregulated hedge and private equity funds.  While hedging bets is a clever strategy, it harms long-term stock market growth by accelerating market corrections.  Most long-term investors can tolerate normal profit-taking.  What they can’t accept are private equity and hedge funds short selling and taking down the market.  Extreme market volatility—caused in part by short sellers—spooks consumers into sitting on their wallets.  Barack must make more financial reform a top priority.  Current regulatory schemes don’t apply to private equity and hedge funds.  When Barack speaks to the nation, he must set a new course for America’s publicly-traded companies:  More domestic jobs. Empty platitudes about tax breaks for companies hiring workers won’t change much.

           Consumer confidence hit a two-year low because the unemployment rate headed upward.  Between now and the election, Obama has one more shot to prove he’s capable of managing a beleaguered economy.  Asking U.S. companies to sacrifice a little profit to hire American workers only makes sense.  Conference Board data indicates that consumers believe, by around 10%, there will be less future jobs.  When expectations about future employment improve, consumer confidence goes up.  Consumers, whether in government or the private sector, need job security.  Barack will probably suggest extending unemployment benefits to the nation’s unemployed, something to keep consumers spending.  Only by restricting short selling in the stock market and fashioning legislation to encourage domestic manufacturing can the nation expect to see more economic stability and job creation.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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