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Moody’s Chief Economist John Lonski breaks down the latest economic data and why Americans expect their incomes to decline in the near future.
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Consumer confidence plunging to a five month low despite easing gas prices.
The news today coming ahead of Friday's monthly jobs report when the unemployment rate is expected.
Hold steady at eight point 1% joining me now John Lonsky chief economist from -- he's investor services that's always been talking about those.
Start with gas prices though because all the -- sudden.
All these warnings about five dollars for a gallon gasoline never happened it's actually declining we did this consumer confidence number -- John.
People are confident what happen.
But what's going on here is that consumers are also responding to to the deep declines we've had in the equity market.
Since the end of the first quarter moreover the job market still is an all that great we still have more than five million.
Fewer jobs today compared to what we have at the start of 2000 today.
And moreover a lot of consumers consider themselves -- be underemployed if they're working.
And the consumer confidence report once again -- tac did a great deal of anxiety among consumers.
Regarding income growth and it usually high percentage of surveyed consumers.
Expect that their incomes will be declining.
Over the next six months.
Police say that in the manufacturing sector John in particular and that sourcing manufacturing jobs coming back in this country.
But at the same time the wages are coming in.
Much slower and not keeping up with inflation report came out those mornings so is that kind of the disconnect -- does -- explain to you the consumer confidence number.
Well you've got a choice do you wanna work if you wanna work you have to accept a lower wage than what you've got paid in the past that I guess what we're finding.
Is more Americans who have been out of worker who want to keep their current job are amenable to wage cuts.
No unfortunately you know these wage cuts make it more difficult to meet outstanding financial obligations like mortgages.
Leases.
And of course if there's Don -- up pressure on wages.
Americans are -- being more conservative when it comes to consumer spending.
Our analysts talk about that the market overall because the stock market.
Shrugged it off today don't know but we're kind of occasional -- few moments ago of their previous guest.
And and -- consumer confidence in markets are taking hires so which is it is to know this the chicken is -- -- in all of this done.
Well you know I would still not overlook the fact that markets are down significantly since the end of the first quarter so per caps.
Today's.
Uptick on the equities side -- on the equity side were mostly the consequence.
A response to an oversold position.
As opposed to the start of a new rising trend for equities you know after all companies are still grappling with.
Slower rates of growth for both business sales and profits from continuing operations.
Well John if that's the case then that's I think your market take a sentencing here because of it.
If that's truly believe you know jobs as it is a lagging indicator frankly.
Even though we look to that report that comes out every once a month every Friday we look for that but at the same time it's -- -- indicator so maybe it company's investors are more confident.
And we have yet to see that trickle down into -- the jobs number you think that's fair.
Well you know we definitely need more in terms of investor confidence we have to.
Basically.
Recapture the losses that we have thus far in the second quarter on the equity side and if perhaps if we do so perhaps if investors do become more confident.
This improved sentiment will eventually be shared by businesses that means more jobs more capital spending and by consumers.
And all of this would create a virtuous cycle that could up proved to be so beneficial to the economy and financial markets going forward -- -- what.
Question mark Johnny and I talked about this before his Europe obviously what happens over there -- we're gonna be happening at Lou Dobbs coming up we're gonna -- -- about -- but.
At the same at the same time if Europe does go.
I guess further into recession if you will look at -- -- some negative numbers out of there.
Do you think -- -- really -- affect on the US economy or do you think that we have become somewhat immune.
Here what's happening over in Europe.
Well you know.
US exports to Europe are not as important as the once war US exports to emerging market Asia.
Now -- see US exports to Europe still the fact that we have the slowdown in Europe.
Has helped to.
In emerging market countries like China and as a result China is purchasing fewer exports -- otherwise from the United States.
So and we can't.
Discount the importance of what's now going on in Europe it is simply not a good thing to have this recession taking place in Europe.
What what the same time the government bond yields of important economies like Spain and Italy.
Are still rising that's a recipe.
For even deeper recession yet if Europe's gonna hurt the United States it's gonna do so.
First through heightened financial market volatility.
-- -- correct what -- marketed the United States wider credit spreads.
We already see this.
And separately it could be that there are a number of smaller businesses in the United States.
That depend on loans from European banks and that particular line of credit could be put in jeopardy.
Last question.
You throw -- -- into the next John what happens.
All right don't be complacent about lower crude oil prices -- lower gasoline prices.
Because.
If events go in the wrong direction in the world's major oil exporting region.
You could have the price of crude oil head up towards a 150 dollars per barrel -- no time and as a result we could be facing.
You got a price for gasoline well in excess of -- dollars per gallon.
And that could threatened to stall the US consumer spending and the overall economy.
John landscape for many is great to see you again done.
My pleasure.
