The state of the U.S. economy is one of the most common topics discussed in my social circle today. In fact, it's hard to go an entire day without getting into a debate with someone about it. Some of the main topics have been job creation, tax increases, and the budget deficit. All of these things factor in to consumer confidence, which is a huge part of what drives our economy. Over the past four years consumer confidence has been down; however, according to CNN Money it's now reached 72.2%, which is its highest level since 2008.
I was quite surprised to learn the polls are showing that Americans think the economy is looking up. Personally, I don't agree with that outlook. Here is why this consumer's confidence is at a record low, and what I'm doing to prepare my family's finances for the worst case scenario.
Job market
CNN Money reported that the number of workers who believe jobs are plentiful increased by 2%, and 19.2% of people think more jobs will become available in the coming months. I'm not sure where these people live, but in our area of Kentucky people are facing lay offs. In fact, my husband's employer has issued several temporary lay offs over the past few months, and they are warning that if the manufacturing sector doesn't improve more cuts will be made.
In addition, a close relative has seen over 30% of his co-workers lose their jobs in the last six months, and the remaining employees have been told that more jobs will be eliminated in the coming weeks.
I'd hardly take these as signs the job market is improving. If anything I see them as proof that companies and their employees are still struggling.
Rising costs and consumer spending
With the holiday shopping season quickly approaching, many economists are taking the rise consumer confidence as a sign that shoppers will be spending more this year. Sadly, that isn't the case for my family. Last year we spent an average of $75 per person on gifts, and still had money remaining. This year the higher costs of food and gasoline, along with the need to add more money to our emergency savings means we have less money to spend. All told, we will have around $300 to spend on gifts for eight people, which means we can spend about $37.50 per gift, which is a 50% cut.
What I'm doing to prepare our finances for the worst case scenario
With potential lay offs looming and costs on the rise, we are making budget cuts to pad our emergency fund. I've lowered our entertainment budget to its lowest level in years; in January 2012 we were budgeting $200 a month for entertainment, and as of November 1, 2012 it is just $75 a month.
I really wish I was optimistic about the economy, but that just isn't the case. From my point of view all the signs are pointing to another sluggish year ahead, which means as a consumer my confidence is low.
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