Picture
The January preliminary Money Anxiety Index improved 1.3 points to 62.2 despite market volatility in the U.S. and abroad in the first week of the new year.  The decrease in the level of money anxiety is in part due to a robust December jobs report adding 292,000 non-farm jobs.  Job gains were strong in the service sectors such as professional & business, education & health and leisure & hospitality.

The improvement in the January Money Anxiety Index comes after 3 months of a flat index mostly due to fear and anxiety resulting from terror attacks in the U.S. and abroad in the last quarter of 2015.  Acts of terror promote economic uncertainty and financial anxiety in people, who instinctively react by reducing spending.  Early readings show that the 2015 holiday shopping season was up only about 1.5 percent over the previous year indicting consumers were holding back on spending.

The biggest threat to the U.S. economy is not market volatility, but rather fears of terrorism.  Terrorism impacts the economy in two distinct ways.  The first is the immediate impact on commerce right after a terror attack.  The November terror attack in Paris de facto paralyzed commerce in parts of Paris, and later on in the entire city of Brussels in Belgium, for a few days.  Repeated economic disruptions like these can have severe economic impact on local and national economies. 

The second economic implication of terror acts is in elevating financial anxiety in the aftermath of every terror attack.  The terror act of September 11, 2001 immediately increased the level of money anxiety of people in the U.S.  In the month of the attack, September, the Money Anxiety Index jumped 5.1 points from 56.9 in the previous month and continued to climb up nearly 21 points when it peaked at 77.6 on December of 2001.


 


Comments


Your comment will be posted after it is approved.


Leave a Reply