However, the growing number of layoffs increases concerns about a deeper slowdown. May. Analysts expect unemployment to climb for several months. As more and more people are put out of work, they will reduce their spending. What economists fear most is that those who still have jobs will become worried about their futures and cut their spending, too. Such a broad decline in spending would slash company profits, leading to more layoffs.
Consumer spending makes up two-thirds of the economy.
So far, spending has remained remarkably strong through the slowdown. However, surveys indicate that people are growing less confident about their economic situations, and department store and auto sales show early signs of weakening. Two other factors could contribute to an erosion of consumer confidence. With electricity rates and gasoline prices expected to climb this summer, they may take a bigger bite out of household budgets. Also, stock market declines can make a psychological dent in confidence and shrink investment portfolios and retirement savings.