Wednesday, February 26, 2014

Consumers Seeing More Jobs (excerpt)

The present situation component of the Consumer Confidence Index (CCI) rose to a new cyclical high this month, exceeding the expectations component for the first time during the current economic expansion. Buoying consumers’ optimism about the here-and-now is their assessment that the labor market is improving. In some ways, the CCI survey may provide a clearer picture of this market than the cacophony of data provided each month by the Bureau of Labor Statistics in its employment report. The picture continues to get brighter:

(1) Jobs are more plentiful. I am especially fond of the survey’s series tracking the responses to questions about whether jobs are plentiful or hard to get. The former jumped to 13.9% this month from 12.5% in January. That may not seem like much, but it is the best reading since June 2008. The percentage of respondents agreeing that jobs are hard to get fell to 32.5%, the lowest since September 2008.

(2) More jobs are boosting confidence. I found that the CCI’s present situation component is highly correlated with the difference between the jobs-plentiful and the jobs-hard-to-get series. In other words, jobs drive consumers’ confidence about their current well-being.

(3) Survey response is confirming falling jobless rate. There is even a better correlation between the official unemployment rate and the jobs-hard-to-get series. We all know that the unemployment rate has dropped during the current economic expansion, mostly because of a sharp decline in the labor force participation rate. If people are dropping out because they are discouraged by the lack of jobs, then the jobs-hard-to-get series should not be falling in lock-step with the unemployment rate. But it is suggesting that labor market conditions really are improving and that other factors are behind the falling participation rate.

Today's Morning Briefing: Consumers & Their Confidence. (1) Weathering the weather. (2) Confidence about “now” is at cyclical high. (3) Jobs are more plentiful and less hard to get. (4) Jobless rate may be doing its job well. (5) In the spring there will be growth, and more retail sales. (6) No clear theme in performance of S&P 500 sectors ytd. (7) A year for stock pickers. (8) Pick stocks in sectors with rising earnings expectations. (9) Health Care and Industrials are standouts. (More for subscribers.)

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