The party's over, now back to economic realities

• Tweet

CHICAGO, Jan. 2 (UPI) -- Now that the holiday revelry is over, U.S. consumers can turn their attention back to the reality of a slow economy and high unemployment.

Though holiday shoppers opened their wallets for the season, increasing buying as much as 5.5 percent from 2009 according to SpendingPulse, the reality is unemployment is hovering at 9.8 percent and the nation's gross domestic product was up just 2.6 percent in the third quarter, with minuscule increases in personal income.

The latest Country Financial Security Index finds just a third of the men and a quarter of the women among the 3,000 Americans 18 to 39 years of age queried by phone since October said they thought their financial prospects would improve in 2011. Overall, 33 percent said they didn't think 2011 would be much different than 2010 while 27 percent said they think things would be worse and 29 percent said things would improve.

Nevertheless, consumers were in a spending mood, with SpendingPulse saying the greatest growth was in apparel (11.2 percent) and e-commerce (15.4 percent).

"We also saw a noticeable return in spending in the larger ticket items, as exemplified by the solid growth in jewelry, luxury and even the furniture category," said Michael McNamara, vice president of research and analysis for SpendingPulse.

On the employment front, CareerBuilder is predicting the unemployment rate will decline this year with more than half of 2,482 hiring managers queried saying they planned to hire more workers.

"2011 will usher in a healthier employment picture as business leaders grow more confident in the economy," said Matt Ferguson, chief executive officer of CareerBuilder. "The year will be characterized by steady, measured gains across various industries."

The survey, conducted Nov. 15-Dec. 2, found 24 percent of employers plan to hire full-time, permanent employees this year, up from 20 percent in 2010 and 14 percent in 2009. Thirteen percent said they expected to hire part-timers and 34 percent said they planned on hiring contract or temporary workers to supplement staff.

The greatest percentage of hires were expected in sales (27 percent) followed by information technology (26 percent) and customer service (25 percent). The most jobs were expected to be available in the West.

And to keep current employees, who have been carrying heavier workloads and working longer hours, 61 percent said they will increase compensation. Forty-one percent of employers said they feared their best employees would leave once the economy improves.

Manpower Inc., however, found only 14 percent of employers planned to add to their staffs in the first quarter, with employment prospects strongest in the Midwest and South and the leisure and hospitality, professional and business services, and wholesale and retail trade leading the way. Manpower's survey is broader, querying 18,000 employers.

The Chicago Federal Reserve Bank is warning consumers not to get giddy about the slowly improving situation, noting all those credit cards that reward consumers for spending, be it airline miles or cash back, lull holders into spending more.

"We find that consumers generally spend more and increase their debt when offered 1 percent cash-back rewards," the Chicago Fed found. "The impact of a relatively small reward generates large spending and debt accumulation. …

"We find that average spending increases by $79 per month and average debt increases by over $191 per month in the first quarter after the cash-back reward program starts."