Consumer Confidence Jumps as Labor Market Optimism Outweighs Inflation Concerns
U.S. consumer confidence rose in October after three consecutive months of declines.
The Conference Board said in an Oct. 26 report that its headline consumer confidence index rose to a reading of 113.8 in October, up from 109.8 in the prior month.
“Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said in a statement.
Concerns about inflation surged to a 13-year high, Franco said, but noted that the impact of rising prices on overall confidence remained muted.
“The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October—a sign that consumer spending will continue to support economic growth through the final months of 2021,” she said.
Consumer spending is a major driver of the U.S. economy, accounting for around two-thirds of output.
Another datapoint reflective of a continued rebound in consumers’ willingness to travel and spend on in-person services was a measure of vacation plans. Close to half of respondents told the Conference Board they intend to take a vacation at some point in the next six months, with the measure hitting its highest level since February 2020.
Two other gauges, one assessing current economic conditions and the other reflecting consumers’ future outlook over the short-term, both rose in October.
The present situation index, which measures consumers’ assessment of current business and jobs market conditions, rose to 147.4 from 144.3 in September, though appraisal was mixed as to the discrete components.
While the percentage of consumers who said current business conditions are “good” fell to 18.6 percent in October from 19.1 in the prior month, the percentage of consumers who said business conditions were “bad” dropped from 25.3 percent to 24.9 percent.
Current labor market assessments were somewhat more optimistic. The percentage of respondents who said jobs are “plentiful” ticked down to 55.6 percent from 56.5 percent. At the same time, 10.6 percent of consumers said jobs are “hard to get,” down from 13.0 percent in the prior month.
The components of the six-months forward expectations for business conditions were also mixed, though the forward-looking labor market outlook was more optimistic than the current. In October, 25.4 percent of consumers expected more jobs to be available six months ahead compared to 21.3 percent in September. At the same time, 18.3 percent in October expect fewer jobs six months ahead, compared to 19.9 percent in the prior month.
Six-months ahead financial prospects also showed improvement in October compared to the prior month, with 18.7 percent of consumers saying they expect their incomes to rise, up from 16.9 percent in September.
The generally optimistic assessment of labor market conditions comes as the number of job openings in the United States remains near a record high. The most recent Labor Department data shows that the number of job vacancies eased from a record 11.1 million at the end of July to 10.4 million on the last day of August—still a historically elevated number.
Also, the so-called quits rate—which reflects worker confidence in being able to find a better job—has risen to a record high of 2.9 percent, Labor Department data showed, painting a picture of job market tightness and growing pricing power of workers.
Consumer price inflation, meanwhile, is running at around a 30-year high and well beyond the Fed’s 2 percent target, pressuring policymakers to roll back some of the emergency stimulus measures, including around $120 billion in monthly asset purchases.
By Tom Ozimek
Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he's ever heard is from Roy Peter Clark: 'Hit your target' and 'leave the best for last.'
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