Mixed economic indicators at fiscal cliff brink

Consumers and investors see the writing on the wall, even if it is not reflected in weekly jobless claims. Image: StockMonkey.com/Flickr/CC BY

The last week of 2012 has brought a confused mixed bag of economic indicators as the nation teeters on brink of the fiscal cliff. Jobless claims reached record lows, reflecting the job market’s growing recovery. Simultaneously, stocks and consumer confidence have plunged.

Job claims fall as fiscal cliff looms

In the week ended Dec. 22, according to the U.S. Department of Labor, the number of people making first time unemployment claims fell 12,000 to a seasonally adjusted 350,000. The less volatile four week average plunged to 356,750 — a nearly five-year low.

The number of jobless claims filed is a representation of the nation’s layoffs. When the numbers fall it generally indicates an improvement in the job market. If the job market sufficiently improves, the unemployment rate goes down, indicating a healthier economy.

Since employers are not yet cutting jobs, it indicates they are being cautious and waiting for the resolution of the fiscal cliff debacle before taking drastic actions. However, that concern is evident in other indicators.

Consumer confidence takes a tumble

Consumer confidence — a representation of how comfortable people feel about spending — fell hard in December, to 65.1. That is after reaching a four-year high of 73.1 in October.

It is single largest drop since the nation’s credit rating was downgraded last year over Congress and the Administration’s inability to reach an agreement on the debt ceiling. Now the nation is in a similar, though potentially more dire, stalemate.

Lynn Franco, director of the Labor Department’s The Conference Board, said, “The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff.”

Stock market reflects cliff worries

Stocks, too, have fallen. Investors are worried as the fiscal cliff negotiations continue to flat-line while nearly at the brink of the precipice.

On Thursday, Dec. 27, stocks fell after Senate Majority Leader Harry Reid predicted that talks would fail and the nation would go over the fiscal cliff. The Dow Jones industrial average dropped 104 points in morning trading. The Standard & Poor’s 500 was down 12 points and the Nasdaq composite index stepped down 28 points.

The public’s trust

If the nation does fall over the fiscal cliff — as many top analysts believe it will — what a devastating disappointment it will be for consumers, who were finally starting to breathe a little after a long recession. The squabbles of lawmakers may well undo all the progress the economy has struggled so hard to gain in the past few years. If that happens, how can our leaders possibly expect Americans to trust them again?