No Consumer Confidence Without Jobs

" Our next guest says do not be surprised that consumers have very little confidence because they have no reason to be confident -- job losses component. Joining us is Jim Glassman senior economist at JPMorgan Chase to a good -- it. It says consumers didn't get the memo from Wall Street that they're supposed to be feeling better about the economy and -- out -- spend. Yeah well I think."

" Blood -- take their cue from what they see going on the stock market so obviously when they see the market improving they know that something's happening. But the truth is most of those wait to see what the job picture looks like him he can't expect consumers to feel that good about things until they start to see the end of the layoffs so. It's a tough time. The surprising thing to all of us economists though is that consumers have been holding a -- year despite the awful news going on in the job market. So I think intelligent people fundamentally we know we're at that time. And yet live. And we're looking for the best and the decline in energy prices helped a -- some people some relief that some money coming through. Fiscal stimulus but. You know I think in time. When. These -- more and more signs of country recovery particularly -- a lot better about it I think they're starting to get the message from from that as you -- revenues -- Scott -- Listen just about not MIC. About twenty minutes ago according to his data and he pulls random people -- in America. So take it as a small sample but of the people he surveyed. The startling 51%. Had no money left over after their monthly bills. That that that they basically spent everything that they. But they made that their obligations where that went which to me AM indicting anybody's way of life but it doesn't bode well for Consumer Spending. And less well -- always been that way it's always been that way frankly and aim American families going out of credit card which eventually has to be paid down why Americans don't save as much in part of the reasons for good reason if you compare us for example with the Japanese to -- a -- People are fundamentally out -- as optimistic and when he got through a tough time like this you don't have much left over after you pay the bills anyway. So the fact that people are not saving that much tells you. We we we know it's tough time. Things will get better and I think the reason Americans tend not to save as much as others is because we're fundamentally optimistic about. The long term prospects for our economy we're hopeful we're gonna get a job back if we lost -- job so. I don't find that to be all that surprising how much is a psychology matter psychology is a big deal but the truth is a job as a bigger deal. So if I don't have a job I didn't matter what my psychology is I can't spend it. But technology is important arbor economy bad by the way this is why we went through about a year ago went through an impulsive collapse because. Investors in the credit market froze and when you can't get credit people can't get loans to buy cars everything shuts down and that's really what we've been dealing -- for the past year."

" We saw how well the cash for clunkers program war ended the pent up demand that was there and they just it took frankly just a little bit of money. Why did we direct so much money. The banks we bailed out two of the three American auto makers it it seems like we made this much more complicated than it needed to be why wasn't there more. Direct help for the potential home buyer was not the time."

" If you remember there was such as a moment of panic about what was going on they needed to do something. To get the credit flowing because what we what we all know is -- our economy we don't get credited to take your hands on credit. -- shut down and so the first and easiest thought was let's get let's get the facts to back on its feet. Truth is this kind of programs helping a lot too and I think this is accomplishing the same kind of thing is getting credit flowing but credit standards are tightening. And demand for loans is also I can understand the demand side. But if credit tightens and those who may be most need credit will not be able to get it. Yeah but you know what it's true. Small businesses that would like to start and then -- erratically hire new workers. In terms of bank credit that's what you're seeing the bank terms a creditor getting tighter but people are really just much more cautious if you think about the broader financial system though. Terms of credit -- getting easier and the way you know that is because. The the rate that a company pays relative to what the government pays. Has been coming down very dramatically. From those very wide level -- Libor spiked. Life and now that it's almost back to north compressed back to where are not -- great companies that is a company that doesn't have an investment grade. Their rates coming down very dramatically -- telling you the credit markets broadly are opening up. To the economy and that's why some of this news that's where we're all turning much more optimistic we economists because trade flows are picking up housing activity starting to turn up. And the auto industry's. You know you need you need loans not just cash for clunkers the fact that people are actually using their mind about -- means they're getting their hands on some credit. Low interest rates a terrific for people or companies who want to borrow but what about people living on fixed incomes here -- yeah I equation that you are missing my mother always reminds me of this. Low interest rates are great for people we're borrowing that's always what we do to get the economy going. But for people who live up fixed incomes. He is the downside and that that the income -- to go to them -- so they. Most retired people living on income can't wait to the recession is over so we get rates back to something more normal they could they could go further round. Take a little bit risk of longer term security or longer term CD and that's how you get higher interest rates. -- You sound mildly optimistic. Quite optimistic -- so much discussion this alphabet -- discussion of recoveries what it's going to look like an old WUV. In the new running out letters right. Doesn't matter what it looks like. No other matters is that happens all the matters is that if we get the economy moving we get growing in the right direction. When that happens that's when financial market participants mallet. And that's why the stock market's been recovering since March and I think doesn't really matter what the shape is as long as removing and because I think a long time to get back to full employment. Where we work hours ago. How long it could take years it could take seven to ten years people getting back to a 5% unemployment yet. And and that's all that's why inflation's not really our our big danger. And this is why the Federal Reserve is going to keep interest rates relatively low for awhile because their principal goal right now is going to be. Get the economy heading back toward full employment. And they know it takes time and in in their minds full plan is about 5% that's where they'd like to see ago. As a what we all thank you Janet good to -- Jim Glassman senior economist at JPMorgan Chase things come back we'll see -- for now but I know you're busy that I will still."