Americans Gain Confidence as Labor Market Makes Headway: EconomyNina Glinski
Greater opportunities to land a job and persistent declines in the cost of gasoline are making Americans feel more hopeful about the economy.
The Conference Board’s consumer confidence index increased to 92.6 in December, the New York-based private research group said today. While the gain was less than forecast, the gauge is close to the seven-year high reached two months ago. Perceptions of current economic conditions advanced to the highest since February 2008.
Gasoline prices that have fallen every day since the end of September left extra cash in people’s wallets heading into the holiday gift-giving season. More consumers said they planned to buy appliances and new cars, reflecting the strongest employment gains since 1999 and record stock prices that kept households upbeat about their incomes, today’s report showed.
“Job growth in 2014 has been pretty strong and lower oil prices are providing a tailwind,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “We’ll have another stable consumer performance in 2015.”
Another report today showed home prices are rising at a slower pace. The S&P/Case-Shiller index of property values in 20 U.S. cities climbed 4.5 percent from October 2013, the smallest gain in two years, the group said in New York. For the nation as a whole, prices rose 4.6 percent after advancing 4.8 percent in the year ended in September.
While smaller increases will help put ownership within reach of more people, prices are still up 25 percent from the depths reached in the aftermath of the recession. That rebound in property values has helped repair homeowners’ finances, which is contributing to gains in consumer confidence and spending that are driving the economic expansion.
“As you look forward, we’re considering a housing market that should be a more normal housing market, which means driven by the pace of income and other aspects of affordability,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York. “Price appreciation should slow to fall more in line with the growth in income.”
Stocks fell, paring a seventh straight December gain for the Standard & Poor’s 500 Index, after the gauge closed at a record for the 53rd time in 2014. The S&P 500 dropped 0.3 percent to 2,083.85 at 12:27 p.m. in New York.
Economists called for a reading of 93.9 in the Conference Board’s index, according to the Bloomberg survey median. Estimates ranged from 86 to 101. The group revised the November reading up to 91 from 88.7.
Today’s figures showed that recent strides in the labor market may start to cool early next year. The share of consumers that said jobs were hard to get dropped to the lowest since March 2008. While the portion of Americans who said jobs were currently plentiful increased to a four-month high, fewer projected that more will be available by mid-2015.
The index of consumer expectations for the next six months cooled to the lowest since September.
“Consumers were moderately less optimistic about the short-term outlook in December, but even so, they are more confident at year-end than they were at the beginning of the year,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement.
The confidence index stands close to a seven-year high of 94.1 that was reached in October, corroborating other readings on sentiment. The Thomson Reuters/University of Michigan final December gauge and the weekly Bloomberg Consumer Comfort Index were also the strongest since 2007.
The Conference Board’s figures showed more people said they planned to purchase refrigerators, washing machines and vacuum cleaners within the next six months. Buying intentions for new automobiles were the strongest since August.
Fewer respondents expect their incomes to decline in the next six months, with the share falling to an almost seven-year low of 10 percent.
Americans have been more successful finding work. In November, employers took on a net 321,000 jobs, Labor Department data showed. The economy has added 2.7 million workers so far this year, the most since 1999. The jobless rate stands at 5.8 percent, the lowest in more than six years.
Cheaper gasoline has freed up money for purchases of other goods and services. Consumer spending helped the economy expand in the third quarter at the fastest rate in 11 years. A gallon of regular fuel at the pump cost $2.27 on average yesterday, the lowest since May 2009, based on data from AAA, the largest U.S. motoring group.
Sanderson Farms Inc., a poultry producer based in Laurel, Mississippi, is among companies that are more upbeat about the consumer.
“We’re a bit more optimistic about the consumer in 2015 than we have been in the past,” Joe Sanderson, chief executive officer, said on a Dec. 18 earnings call. “It feels like the economy is moving in the right direction.”