Job Growth Aids Consumer Spending Index

April 14, 2010

This article is included in these additional categories:

Analytics, Automated & MarTech | Data-driven | Financial Services | Retail & E-Commerce | Staffing

Improvements in the job market and a reversal in rising tax rates caused the Deloitte Consumer Spending Index to rebound in March 2010, following three straight months of decline.

The Index, which attempts to track consumer cash flow as an indicator of future consumer spending, rose from a revised score of 4.21% to 4.47%, a strong 6.2% increase, in March 2010. The previous month, the Index dropped 6.4%, from a score of 4.5%.


A continuing decline in initial unemployment claims from their peak last year was the key driver in the Index’s positive growth. A decline in state and local tax rates, which had risen in February 2010, also contributed to the Index’s growth.

The Index, comprising four components, tax burden, initial unemployment claims, real wages and real home prices, slipped to 4.5% in January 2010 from 4.64% in December 2009. Previously, the Index grew for six straight months between June and November 2009. However, the Index is still well above its recent low point of 3.07% in October 2007.

Deloitte advises marketers to be prepared for the release of stifled consumer demand, although providing value will still be crucial to successfully attracting customers.

Analysis of Each Index Component
Tax Burden: The tax burden has recently moved slightly higher, although it remains at a record low level.

Initial Unemployment Claims: Following more than two years of increases, initial unemployment claims have recently been declining. The March increase in employment, only the second of this recovery, suggests that initial claims will continue to recede.

Real Wages: Real wage growth, which had been the biggest contributor to the Index until late 2009, remains down slightly from a year ago as inflation continues to cut into ongoing nominal wage growth.

Real Home Prices: The declines in real new home prices have weakened dramatically over the past year. The data are suggesting that the Index will shortly be helped by rising home prices – something not seen in four years.

Unemployment Stays Flat Despite 162K New Jobs
Overall, the official US unemployment rate stayed flat at 9.7% for the third consecutive month in March 2010, according to the Bureau of Labor Statistics. As reported in Retailer Daily, the US economy added 162,000 non-farm payroll jobs last month. This marks a significant improvement from 36,000 non-farm payroll jobs lost in February 2010 and 20,000 lost in January 2010.

Temporary help services added 40,000 jobs in March. Since September 2009, temporary help services employment has risen by 313,000. Employment in health care also continued to increase in March (27,000). In addition, manufacturing employment continued to trend up in March (17,000); the industry has added 45,000 jobs in the first three months of 2010. Last month, job gains were concentrated in fabricated metal products (9,000).

On the negative side, financial services lost 21,000 jobs in March 2010 and employment in the information industry decreased by 12,000 jobs.

Employment Trends Index Suggests Job Stability
The Conference Board Employment Trends Index rose 0.7% in March 2010, from a revised score of 93.7 to 94.4. As reported by Retailer Daily, this marks the seventh straight month the Employment Trends Index (ETI) has risen, signifying what the Conference Board says is likely lasting job growth.

More significant than the ETI’s modest monthly gain is the 5.5% annual growth rate it has undergone since March 2009. During the past three months, all of the index’s eight components have been improving.

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