December consumer confidence wilts to all-time low

ByABC News
December 30, 2008, 1:48 PM

WASHINGTON -- Consumer confidence sank to a record low in December and is expected to stay depressed for months as news of layoffs, store closings and other economic doom and gloom will likely continue to weigh on Americans.

The consumer confidence index fell to 38 in December, down from 44.7 in November and the lowest in the 41-year history of the closely watched gauge, the Conference Board said Tuesday. A year ago, the index was at 90.6.

"Only a modest recovery is expected in the second half," said Lynn Franco, director of the Conference Board's Consumer Research Center, in a statement.

The plunge largely reflects a sharp deterioration in the job market. Forty-two percent of consumers said jobs were "hard to get" in December, up from 37.1% in November and the highest in 16 years.

A number of economists, including those at Bank of America and consulting firm RDQ Economics, said such pessimism on the job front suggests the unemployment rate may have jumped in December to at least 7%. The jobless rate was 6.7% in November and has not topped 7% since 1993.

The government is scheduled to release the December jobs data on Jan. 9.

Employers are expected to cut jobs at least through the first half of the year, says Richard Moody, chief economist at real estate investment firm Mission Residential.

"It's hard to really see (confidence) turning around until the job market improves," he says.

Also likely to weigh on consumers in 2009 are widespread store closings, Wachovia senior economist Mark Vitner says. A number of well-known companies, such as Ann Taylor, Sears and Circuit City, have already announced plans to close stores, and many more are expected to follow suit after the disappointing holiday shopping season.

Retailers "are one of the more visible aspects of the economy," he says.

It's a vicious cycle: If consumers become less confident and cut their spending, then more stores could close, further depressing consumers' psyches. Economists keep a close eye on confidence, as consumer spending accounts for more than two-thirds of U.S. economic activity. Fewer consumers in December said they planned to buy a car, a major appliance or go on vacation than a year ago, The Conference Board said.