Despite the recent but modest drop in weekly jobless claims, improving retail sales and strength in stocks, consumer confidence has been stuck in a very narrow range since June, per the Conference Board’s survey, and there are few signs confidence is about ready to emerge from its funk (see chart below).
Worse, the index is far below where it stood in December 2007 – 90.6 – when the recession officially began.
Contrast the Conference Board’s survey with the one provided by the University of Michigan (see second chart below).
Consumer sentiment was impacted by the summer slowdown and fears the economy might be set to slip back into a double-dip recession. But when growth resumed, sentiment also improved.
Further, at 74.5, it appears poised to top the pre-recession level of 75.5.
So why the divergence? Methodology seems to give us a clue.
Although the University of Michigan does not offer specifics on the job market, it did say December’s rise “was due to improved employment expectations that made consumers more willing to spend and adopt more favorable prospects for the overall economy.
"Consumers reported much more favorable news about recent changes in the job situation, and more frequently expected the unemployment rate to decline during the year ahead.”
Compare that relatively rosy assessment with the Conference Board’s take on the labor market – “Consumers’ assessment of the labor market was less favorable than last month. Those saying jobs are "plentiful" decreased to 3.9 percent from 4.3 percent, while those stating jobs are "hard to get" edged up to 46.8 percent from 46.3 percent.”
Given the fairly upbeat Christmas shopping season and continued gains in retail sales, for now the University of Michigan’s Index seems to be doing a better job of capturing the mood.
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