Hints of Recovery Fail to Lighten Americans’ Mood : Economy: Many consumers remain unconvinced that things will get better soon. Their pessimism may be prolonging the slump.

With encouraging bits of economic news popping up like spring crocuses, it would seem that a burst of consumer confidence must be in the offing. But the mood of Americans is far from sunny.

“Consumers are not just down, they’re beaten down,” said Ken Goldstein, an economist with the Conference Board, a New York-based business-research group whose monthly consumer confidence index is at its lowest level in almost 20 years.

“These folks are just not convinced that things are going to turn around in the next six months.”

Bombarded since mid-1990 by relentless reports of layoffs, unemployment lines and shrinking wages, shellshocked consumers have hunkered down during this recession. Since consumer spending accounts for two-thirds of the nation’s economic activity, economists say the persistent gloominess, combined with massive corporate down sizings, has helped prolong the downturn.

Recent upswings in retail sales, home building and industrial output have cheered executives and incumbent politicians. But many economists and pollsters say that, until consumers are soothed by several months of positive news, any budding enthusiasm about spending will continue to be nipped by deep concerns about job security, social problems and declines in housing values and the living standard.

Such anxiety about the economy prompted Jim and Kathleen Decker of St. Peters, Mo., to trim expenses. With one child and another on the way, the Deckers recently sold their pricey imported sports car and bought a used Ford van, saving $10,000 off the purchase price of a new vehicle and $500 a year on insurance. They also have curtailed weekends at Lake of the Ozarks.

Although his job as a software consultant and hers as a Western Union operator seem secure for now, Decker said that their mood is “kind of tentative.”

With the Deckers and other consumers down in the dumps, a pickup in spending of the type that propelled robust recoveries from earlier recessions is unlikely, economists say. The best that we can hope for is slow, halting improvement.

“The pessimism and fear will abate only if the news about layoffs and plant closings begins to diminish and if there is evidence of companies hiring people,” said George Rosenbaum, chief executive of Leo J. Shapiro & Associates, a Chicago research firm.

On Tuesday, two closely watched measures of consumer confidence--from the Conference Board and the University of Michigan--will be released. Economists hope for signs that the nation’s glumness has bottomed out. But, despite some expected brightening of mood, the numbers are likely to stay well below those considered necessary for sustained economic growth.

“There’s no way you can read these data to say people are optimistic and pleased with the economy,” said Richard Curtin, director of the University of Michigan’s Surveys of Consumers.

Linda Benedict, a data-processing project manager in Bethel, Conn., is certainly not upbeat. She says she is “nervous” about the economy, having seen plenty of friends and neighbors lose their jobs.

“I’m making an effort to get credit cards cleared and to keep ‘em cleared,” Benedict said.

Likewise, Ruth Anne Hood, a widow in Greensboro, N.C., who earns a small income as a teacher’s aide, is “much more cautious” about spending than in the past. Contributing to her concern is the fact that lower interest rates--a boon to many individuals who have cut monthly debt by refinancing houses--have reduced her investment income.

“I don’t see that people are jumping (to spend),” Hood said. “I don’t hear of any general lightening of feeling, people saying, ‘OK, we can go to it.’ ”

Consumers have clearly had a lot to cope with in this recession, the first since 1982 and a sharp contrast to the nearly unprecedented boom of the 1980s. Overnight, it seemed, companies and individuals had to begin a sober retrenchment after the seemingly boundless optimism and debt-financed binge spending of the last decade.

They also had to face the fallout of that free-wheeling time: the collapse of the junk bond market, the savings and loan debacle and the widespread downturn in commercial real estate.

Layoffs reached deeply into the ranks of white-collar professionals, who had been largely immune to past downturns. Real wages eroded, and the long-running slump in housing, particularly in California, drained a once reliable source of wealth. That made banks leery of lending and homeowners, who entered the recession with hefty debt loads, reluctant to borrow anew.

With giants such as General Motors and IBM going through painful contractions, thousands of formerly high-paying jobs that had been viewed as safe are feared lost forever. That is particularly true in the defense industry, where payrolls are being slashed because of Pentagon cutbacks unrelated to the recession. Other hard-hit areas are the finance, airlines and high-technology industries, which have been scaling down to become more efficient.

Everywhere consumers turn, they are confronted with grim television and newspaper coverage of plant closings and overwhelming problems with welfare, medical care and the homeless.

“In previous recessions, laid-off workers had a feeling they’d be called back,” said Eileen Appelbaum, associate research director at the Economic Policy Institute in Washington. “Now it’s (permanent) downsizing.” For many individuals, she added, it “has been a rude awakening.”

Even workers who have managed to hold onto their jobs fret that they could be next to go. Chastened by the aftermath of the self-indulgent 1980s, they too are trying to curb spending and save money. There is a pervasive feeling in the work force that the people who are working are fortunate to have a job.

“The survivors of layoffs aren’t convinced they’ll survive the next one, and they are convinced there will be another,” said the Conference Board’s Goldstein.

Frank Hodges, a mechanic at Lockheed Corp. in Palmdale, Calif., expects to get a pink slip, as have many of his friends in the defense and aerospace industry.

“It’s just a matter of time,” he said. If he does get laid off, or takes a lower-paying job at Lockheed, his wife will have to work, he said, and that will mean paying for day care for their two children.

Many observers of consumer behavior say the pervasive malaise has roots in deeper woes, notably a crisis of confidence in the nation’s leadership.

“People see President Bush and Congress as unwilling or unable to address (the problems of) education, the U.S. role in the world, crime, drugs,” said Anthony Downs, a senior fellow at the Brookings Institution in Washington. “There’s a feeling . . . that the U.S. is slipping as a society.”

At 7.3%, the nation’s unemployment rate is well below the nearly 10% level in 1982 and might not seem enough to warrant such gloom and doom. However, some economy watchers contend that the recent job reports understate the situation.

Michael Murphy, a stock market bear in Half Moon Bay, Calif., noted that the Bureau of Labor Statistics last November acknowledged that the nation’s payroll was overestimated by 650,000 jobs. Murphy contended that the figure, which is also used to estimate personal income, is actually much higher.

Consumers, he added, haven’t been fooled. “People know that business is not getting better yet,” Murphy said. “They’re still sitting on their hands.”

Some observers have pointed to retailers’ sales gains of 2.1% in January and 1.3% in February as solid evidence of a recovery. But economists and many retailers themselves caution that those compared with very weak numbers a year ago, when Americans were staying home to watch the Persian Gulf War on television.

“I’m not ready to say the consumer has voted and is back,” said Kenneth A. Macke, chairman and chief executive of Dayton Hudson Corp., a Minneapolis department store company.

It’s possible that Americans will have short memories about this painful downturn and that confidence will come roaring back. But it’s not likely, the pollsters say.

“In the past, recession was seen as a temporary interruption before the good times would roll again,” said Curtin of the University of Michigan. “But now consumers expect that when it ends, the good times will not be like those of the past.

“They look ahead 3, 5, 10 years and they see some significant concerns on the horizon.”

Measuring Consumer Confidence Consumer confidence, as measured by two major indexes, typically falls prior to recession and rises before recovery begins. No significant uplift in confidence has yet been detected since the current economic slump began.

Source: The Conference Board and University of Michigan