Consumer-confidence measures are climbing out of the depths reached during the last recession as employers step up hiring and stocks rally, signaling Americans may be poised to increase spending.
The Conference Board’s gauge in February increased to the highest level in a year, figures from the New York-based research group showed today. The Bloomberg Consumer Comfort Index rose to an almost four-year high in the week through Feb. 19, and the Thomson Reuters/University of Michigan measure of consumer sentiment increased to 75.3 in February, the sixth straight monthly gain and the longest advance since 1997.
The last time the University of Michigan index stayed above 75 for more than two months was in the period through January 2008, a month after the end of the previous expansion. Consumers are likely to grow more optimistic as the two-year recovery boosts employment and incomes further, said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York.
“The major driver of the improvement in confidence has been the labor market,” Maki said. “We would expect consumer confidence to continue trending higher if the labor market continues to improve as we expect.”
Employers have added 1 million workers to payrolls since July, according to Labor Department data. During that same period, the unemployment rate dropped by 0.8 percentage point, the biggest decline since 1984. The rate was 8.3 percent in January, the lowest in almost three years.
The pace of job growth is picking up. Payrolls rose by 243,000 in January, the biggest gain since April.
The world’s largest economy grew at a 2.8 percent annual pace in the fourth quarter of 2011, the fastest since the second quarter of 2010. The index of U.S. leading indicators rose in January for a fourth month, signaling the economy will maintain its expansion.
Growth is helping to power stock-market gains. The Standard & Poor’s 500 Index is up 9.1 percent in 2012, the best start to a year since 1991. The S&P 500 rose 0.3 percent in New York today to 1,372.18. The Dow Jones Industrial Average added 23.61 points, or 0.2 percent, to 13,005.12 for its first close above 13,000 since 2008.
Gains in stocks, in turn, are contributing to household wealth, helping to make up for some of the damage wrought by the 18-month recession.
Unemployment Claims Decline
A decline in claims for unemployment benefits is adding to evidence of a labor-market recovery.
Applications for jobless benefits held at 351,000, the lowest level since March 2008, for the week ended Feb. 18, according to Labor Department data. The four-week average, a less-volatile measure, declined to 359,000, also the lowest since March 2008.
The Bloomberg Consumer Comfort Index rose to minus 38.4 in the period to Feb. 19, the highest since April 2008, from minus 39.8 the previous week. It marked the second straight week above minus 40, which is the level associated with recessions and their aftermath.
The Conference Board’s gauge this month increased more than forecast to 70.8 from a revised 61.5 in January, today’s report showed. Economists predicted the index would climb to 63, according to the median estimate in a Bloomberg News survey.
A sustained rise in gasoline costs poses a threat to confidence. A gallon of regular unleaded gasoline climbed to $3.72 as of Feb. 27, the highest level since June, according to AAA, the nation’s largest automobile association.
“Gasoline prices have been a pretty important contributor to consumer confidence over the last decade or so,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “When gasoline prices spike, consumer confidence goes down.”
Still, rising incomes may help spur a recovery in housing, which was at the principal driver of the last recession, he said.
“People are only going to buy a house if they feel confident they’re going to have a job and be able to make the mortgage payments,” Stanley said.
Homebuilders such as Miami-based Lennar Corp. are optimistic.
“Consumers are beginning to realize that housing represents an undeniable value proposition, and accordingly demand is growing,” Stuart Miller, chief executive officer at Lennar, the third-largest U.S. homebuilder by revenue, said on a Jan. 11 conference call.
Sales of previously owned homes, which account for about 94 percent of the market, rose in January to the highest level since May 2010, the National Association of Realtors said on Feb. 22.
Purchases of cars and light trucks in the U.S. climbed to an annualized rate of 14.1 million last month, the highest since the so-called cash-for-clunkers program in August 2009, according to industry data.
Companies such as Houston-based Sysco Corp., the biggest North American distributor of food to restaurants, are counting on further gains in consumer confidence and spending.
“To a large extent, our performance in the second half of the year will be heavily influenced by how much the recent uptick in consumer confidence translates into increased consumer spending on meals away from home,” Chief Executive Officer Bill DeLaney said on a Feb. 6 conference call with analysts.