Santa May Get Sacked by Grumpy Consumer

An October Christmas sales forecast by Gallup suggests that this season may be worse for retailers than the one following the 1990-1991 recession. And recent polling by the group shows that two-thirds of Americans feel they have been hurt by the financial meltdown, with 70% believing they will suffer financially over the long run.

It's important to note that consumer confidence does not correlate perfectly with spending or other economic indicators. But action seems to be catching up with negative sentiment, as retail spending declined 1.2% last month, the sharpest drop since February 2006. While holiday sales will certainly not be stellar this year, they also might not be the lowest on record. Results will hinge largely on whether the government intervention to kick-start the financial system will actually spur lending, production and job growth.

Indeed, the employment picture appears bleak in most sectors of the economy, as businesses downsize to deal with the downturn and job cuts announced earlier this year started to take shape. Housing, financial and manufacturing companies grabbed headlines earlier this year as they made major slashes to their collective workforce.

The cuts have not yet abated, as the unemployment rate hovers near 6%, and several major firms, including Goldman Sachs (GS Quote), Bank of America (BAC Quote), General Electric (GE Quote), Xerox (XRX Quote), Whirlpool (WHR Quote) and Coca-Cola (KO Quote) have all announced more cuts in recent weeks. The news signals a further climb in the unemployment rate going forward.

"If your job is in jeopardy, I hate to say nothing else matters, but really it doesn't," says Betsy Gelb, a professor at the University of Houston's Bauer College of Business. "Your ability to pay your mortgage is certainly job dependent. And OK, your house is worth less, but if you're not planning to sell it tomorrow, it's not as big of a concern. Your perception of risk to your job is just fundamental to your confidence as a consumer."