RBC Consumer Outlook Index: Half of Americans Report Job Hunting is More Difficult than a Year Ago
Despite Jobs Worries, Overall Consumer Confidence Rises for April
Thursday, March 31, 2011
New York, NY - Half of U.S. consumers (49 per cent) think that it has become more difficult to find a job compared to a year ago, while just 14 per cent think it has become easier and a third (37 per cent) believe conditions are about the same, according to this month's RBC Consumer Outlook Index. The results are based on a survey of more than 1,000 Americans.
"The Jobs Sub-Index, which rose slightly this month, has remained just above the breakeven point for the past five months, and this suggests that employment gains are likely to remain modest in the near-term," said Tom Porcelli, chief U.S. economist at RBC Capital Markets. "In addition, only 48 per cent of consumers who are either unemployed or underemployed, or who know someone who is, are willing to change careers or learn new skills. This finding suggests a lack of capitulation by job-seekers, which likely contributed to the natural rate of unemployment rising from five per cent to closer to seven per cent. The absorption process for the unemployed may be a slow, drawn-out affair."
Continued sluggishness in the housing market is also limiting options for the unemployed or underemployed. Only one-in-four (23 per cent) who fall into these categories are willing to move somewhere with more jobs, and 20 per cent are willing to move, but are not likely to do so because of the difficulty of selling their home.
"The recent analysis about the unemployed suggests that the decline in housing prices coupled with the inability to sell a home could limit workers' mobility," said Porcelli. "Twenty per cent of respondents said they would be willing to move but that selling their home would be difficult. This is consistent with the 23 per cent of residential properties with underwater mortgages."
While Americans remain concerned about jobs, consumer confidence for April rose moderately after declining in each of the previous three months, with the RBC Consumer Outlook Index rising to 44.8, up 2.3 points from March's 42.5.
"Consumer confidence rose, though it remains quite low from an historical perspective," said Porcelli. "While events in Japan are still evolving, it appears at this point that the U.S. recovery will remain on track. Nevertheless, the ongoing instability in the Middle East region and the commensurate back-up in oil prices have continued to weigh on overall confidence."
This month's increase in the RBC Consumer Outlook Index was reflected in strengthening sentiment across all of the sub-indexes. The improving consumer sentiment is driven primarily by the Current Conditions Sub-Index, which climbed to 35.9 for April from 32.4 last month, rising to its highest level since January 2010. While only 13 per cent rate their current finances as "strong," the number who perceive their finances as "weak" declined to 41 per cent, down from 47 per cent last month and the lowest level in more than a year.
"Of all the underlying metrics, this has the strongest predictive power when it comes to consumer spending. With two-thirds of the economic data for the first quarter already in hand, it appears that consumer spending is poised to grow at a three per cent rate. The RBC Consumer Outlook Index suggests that spending likely slowed in March but given the sharp rebound in current conditions this month, any slowing will likely represent a bump in the road and not a change in the upward trend," said Porcelli.
Additionally, the Jobs Sub-Index rose slightly this month to 51.8, from March's 50.1. The Expectations Sub-Index edged up to 54.5 for April from 53.6 in March. The Investment Confidence Sub-Index improved appreciably, climbing to 39.5 from 36.3 last month. Consumer pessimism about ability to invest for the future decreased for April to levels not seen since December 2010. Those believing it will be a bad time to invest in the stock market dropped to 31 per cent, from 39 per cent in March.
The Inflation Expectations Sub-Index, which began in December 2010 and does not play into the overall calculation of the Consumer Outlook Index, stayed basically unchanged, edging down slightly to 77.2 from 77.4 in March. Consumers expect prices to continue increasing in all major categories except home prices.
Despite the improvement in consumer confidence, worries remain about the nation's long-term future. Two-thirds of Americans (67 per cent) said that the country is on the wrong track, the same as in March and the twelfth consecutive month at or above the 60 per cent mark.
The RBC U.S. Consumer Outlook Index provides the most up-to-date and comprehensive outlook of U.S. consumers based on data collected from interviews with a nationally representative sample of more than 1,000 U.S. adults conducted over a multi-day polling period each month by Ipsos, the world's second-largest market and opinion research firm. The results in this news release reflect some of the findings of the Ipsos poll of 1,006 U.S. adults conducted March 24-27, 2011. The RBC Consumer Outlook Index is released within 36 hours after the U.S. online panel members are interviewed. Weighting is employed to balance demographics and ensure that the survey sample's composition reflects that of the U.S. adult population according to Census data and to provide results intended to approximate the sample universe.
The entire RBC Consumer Outlook Index report can be viewed at: www.rbc.com/newsroom/rbc-consumer-outlook-index-releases.html.
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Royal Bank of Canada (TSX, NYSE: RY) uses the initials RBC as a prefix for its businesses and operating subsidiaries, which operate under the master brand name of RBC Financial Group. Royal Bank of Canada is Canada’s largest bank as measured by assets, and is one of North America’s leading diversified financial services companies. It provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services on a global basis. The company employs approximately 60,000 people who serve more than 14 million personal, business and public sector clients through offices in North America and some 30 countries around the world. For more information, please visit www.rbc.com.