TOPICS > Economy

Consumer Confidence Hits New Low as Home Prices Sink, State Unemployment Soars

BY Admin  January 27, 2009 at 1:35 PM EST

JCPenney store in New Jersey; AP file photo

As people who still
have jobs worry about holding onto them, a widely watched barometer of consumer
sentiment fell to a new low, a private research group said.

The Conference
Board’s Consumer Confidence Index edged down to 37.7 from a revised 38.6 in
December. The index has hit its lowest troughs since it began in 1967, and is
hovering at less than half its level of January 2007, when it was 87.3.

“It
appears that consumers have begun the new year with the same degree of
pessimism that they exhibited in the final months of 2008,” Lynn Franco,
director of the Conference Board Consumer Research Center, said in a statement,
according to the Associated Press. “Looking ahead, consumers remain quite
pessimistic about the state of the economy and about their earnings.”

Until she sees
improvement in shoppers’ outlook for the economy, Franco said she can’t say
that “the worst of times are behind us.”

Economists
closely watch consumer confidence since consumer spending accounts for more
than two-thirds of economic activity. But the latest signs of nervous consumers
have spurred fresh alarm about the economy and the retail industry, which is
struggling with the most severe spending retrenchment in decades.

Meanwhile,
another closely watched index shows home prices dropping by the sharpest annual
rate on record in November.

The Standard
& Poor’s/Case-Shiller 20-city housing index tumbled by a record 18.2
percent from November 2007, the largest decline since its inception in 2000.
The 10-city index dropped 19.1 percent, tied with October for the biggest drop
in its 21-year history.

Both indices
have recorded year-over-year declines for 28 straight months and prices are at
levels not seen since February 2004.

Prices in the
20-city index have plummeted 25.1 percent from their peak in July 2006. The
10-city index has fallen 26.6 percent since its peak in June 2006.

All 20 cities
recorded year-over-year declines in November.

Prices in every region fell more than 1 percent from
October. In eight metro areas, prices fell at a record monthly rate.

Phoenix and Las Vegas were hardest hit in November, with
prices down 3.4 percent and 3.3 percent, respectively. The two cities also have
the worst returns over the one-year period, with prices falling 32.9 percent
and 31.6 percent, respectively.

“Overall, more than half of the metro areas had record
annual declines,” he said.

On the jobs
front, state unemployment rates shot up nationwide last month, with Indiana and
South Carolina racking up the largest monthly increases.

All 50 states
and the District of Columbia recorded monthly increases.

The Labor
Department reported that Indiana’s jobless rate soared to 8.2 percent in
December from 7.1 percent in November as workers were hit by layoffs in
manufacturing as well as in construction and retail.

South Carolina’s
unemployment rate bolted to 9.5 percent from 8.4 percent as laid-off factory
workers find it difficult to move into different types of jobs. Each state
logged a 1.1 percentage point rise in unemployment from November to December.

The U.S.
unemployment rate jumped to a 16-year high of 7.2 percent in December.

Michigan and
Rhode Island were the only states to see their unemployment rates hit double
digits last month.

Six states –
Massachusetts, Michigan, Nevada, New Jersey, New York and Oregon — each posted
over-the-month gains of a full percentage point in their unemployment rates in
December.

Among the
states with the lowest rates, Wyoming posted the lowest at 3.4 percent in
December. It was followed closely by North Dakota at 3.5 percent and South
Dakota at 3.9 percent.

The U.S.
recession, which started in December 2007, is on track to be the longest
downturn since World War II.