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5/3/11 - Economy Watch: Confidence up, but gas costs a concern

Mississippians were more confident about the economy in the first quarter of 2011, but higher gas prices, lack of growth in income and housing market uncertainty are significant concerns.

The latest Mississippi Index of Consumer Sentiment shows a 2.3 percent rise in confidence. This reading continues the upward trend seen since last summer.

Of note, the gains in confidence are highly concentrated in upper income individuals.

Since the beginning of the Great Recession, lower income families generally have held outlook scores that are lower by five to 10 points. However, the spread increased significantly in February 2011 when the difference jumped to 20 points. This continued in March where the current index for families with less than $75,000 is 61.1 and the index for families with over $75,000 is a much higher 79.4.

"In past recoveries, increased confidence has been experienced equally across the income distribution, but this recovery is different," said assistant research professor Becky Smith.

Smith is editor of the Mississippi State University-based Economy Watch, which is published in cooperation with BankPlus and Entergy. (For more, see

According to Smith, the distinction in confidence can be explained by comparing the losses in jobs compared to the losses in wages and salaries. The nation has experienced a higher percentage of loss in jobs compared to losses in wages and salaries. This means that the jobs that were lost were mainly lower paying jobs.

In Mississippi, the state lost 50 percent more in jobs than it did in wages and salaries. This indicates that lower income individuals were the hardest hit by the recession.

Other survey findings include:

--In Mississippi, employment has risen five consecutive months. Manufacturing has seen increases for three months. The gains are mostly seen in professional and business services and leisure and hospitality. Local government employment declined.

--Consumer expectations on the unemployment rate are very encouraging. Just 22 percent expected the unemployment rate to increase in 2011, the lowest level since May 2000. Consumers expect job growth to be on par with before Great Recession figures, but do not anticipate substantial gains.

--Higher gas prices will slow gains, but will not overturn the recovery in consumer spending. The current level of concern about gas prices is about half of what it was during the $4 a gallon prices during 2008. The changes in credit availability will limit people's ability to manage higher gas prices using credit cards and that leaves cuts in discretionary spending.

The consumer sentiment index will be an important indicator to watch over the next couple of months because consumers have shown they are adept at picking up the early signs of recession, Smith added.

More than 500 telephone surveys conducted by the MSU Survey Research Laboratory produced the statistically significant results for the first quarter report.

For additional information about Economy Watch, contact Smith at 662-325-9242 or e-mail

JIM LAIRD | University Relations and the Office of Research and Economic Development

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