FOREX TRADING

Confidence Drop as Americans Still Fear the Outlook for the Labor Market!

Consumer confidence retreated in September according to the U.S. Conference Board, as conditions are still challenging amid rising unemployment and tightened credit conditions, though the economy has been showing signs of improvement recently, yet consumers are yet to feel a drastic change over the outlook of the economy.

Consumer confidence dropped in September to 53.1 from the prior revised estimate of 54.5 and below median estimates, as the present situation index dropped to 22.7 from 25.4, while the expectations index dropped slightly to 73.3 from 73.8, whereas people saying business conditions were bad rose to 46.3 from 44.6.

The labor market has been one of the main reasons behind falling confidence recently, as unemployment continued to rise over the past few months to reach a 26-year high in August at 9.7% and unemployment is still expected to rise further over the upcoming period, meanwhile, people saying jobs were hard to get rose to 47.0 from 44.3 according to the U.S. Conference Board, which signals the ongoing weakness in the U.S. labor market.

The U.S. labor market has been on the receiving end of this recession, as companies continue to layoff workers in a bid to reduce costs and survive the ongoing economic weakness, thought the pace of layoffs started to ease recently, but job losses continue to mount and this will surely weigh down on economic activity in the United States.

Moreover, the S&P/CS composite-20 index which measures prices of homes in 20 metropolitan areas in the United States was released for the month of July, the index signaled that prices rose by 1.61% in July following the prior reported rise of 1.43% back in June, while compared with a year earlier prices of homes dropped a further 13.30% compared with the prior reported drop of 15.40%.

The housing market started to show some signs of stabilization recently, as home prices started to rise slightly and bargain buyers started to take advantage of cheap home value, meanwhile, the government continued to support the housing market through providing aid for first time buyers, which indeed helped in restoring stability for the housing market.

Yet, the housing market will probably continue to recover over the upcoming period, as conditions are still somehow challenging, though it seems we have reached the bottom for the housing market, but we can’t really say that activity will start to rebound strongly, as the housing market remains under pressure from rising foreclosures and tightened credit conditions.

Tightened credit conditions have been also weighing down on economic activity in the United States, as it directly affected consumer spending which represents the main support for economic growth, as consumer spending accounts for more than 2/3 of economic activity, and in order to insure recovery is sustained, the Federal Reserve Bank and the U.S. government both need to make sure that consumers have the money to spend.

But, since unemployment is still expected to rise above 10% through the first quarter of 2010, we can’t really judge that the U.S. economy will undergo a strong recovery right now, and that means that we should continue to see gradual signs of increased activity over time, and the real recovery will probably stall over the course of this year and well into the first half of next year as well…