Job pessimism gets worse as consumer confidence slowly increases

Consumers’ assessment of labor market conditions weakened in August as the percentage of respondents judging jobs as being “plentiful” declined to 3.8% from 4.4%, while those viewing jobs as being “hard to get” rose to 45.7% from 45.1%.

BOTTOM LINE

The improvement in confidence in August represents only the reversal of the pessimism over the outlook that mushroomed in July (and was perhaps related to the inability to cap the oil leak in the Gulf, which has since been sealed) and is not a sign of faster spending in August. Indicators of current conditions—especially the labor market—deteriorated in August in a further sign that private job creation may have slowed in the latest month. We reiterate our basic point that consumer spending is mostly related to objective indicators of household finances (primarily income and then wealth) and has very little to do with these measures of the psychological well-being of the consumer. Consumer spending started the third quarter showing a moderate pace of expansion in real terms (around 2% relative to the second quarter) and we have seen the personal savings rate average a very similar level in the first seven months of this year (5.8%) versus the level seen in 2009 (5.9%), which leads us to believe that there is no move for consumers to build up savings at a faster rate. We expect consumer spending to grow modestly in the second half of the year as the economy continues its fitful recovery.

Source RDQ

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