EconoFACTS

December 21, 2022 | 10:57

Consumers' Hearts Are Light, But Their Troubles Are Still In Sight

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

The weather in parts of the country may be frightful, but the job market is still delightful......

The Conference Board's consumer confidence index brightened for the first time in three months, up 6.9 pts to an 8-month high of 108.3 in December, with support from both components: the "present situation" (+8.9 pts) and "expectations" (+5.7 pts).

So what drove these good feelings of comfort and joy? Well, this particular survey is based more on the employment environment and that's where one can find the positive influence. Those who found that jobs were more plentiful picked up again, while there were fewer respondents who found it more difficult to land a decent gig. So, on net, the "jobs plentiful" component rose, which suggests that the jobless rate may tick lower after staying at 3.7% for the last two months. (We will find out when the BLS releases the official figures on January 6, 2023.) This is good news, obviously but also bad news as the Federal Reserve sees the labor market as being out of balance. Perhaps the central bank will take note of inflation expectations one-year out .... it fell for the first time in three months.

But, the fact that confidence is holding up, considering that inflation is still up 7.1% y/y, is impressive.

Gas prices are still elevated, which is why chestnuts are roasting by an open fire ....

...... and yes, a turkey and some mistletoe help to make the season bright......but food prices have surged, too.

Again, it all comes back to having a job. So yes Virginia, there is a job offer out there in Whoville after all. Fewer than before, but still quite a few.

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In a separate release, U.S. existing home sales have had a lot of issues dashing through the snow .... they were down for the 10th month in a row, the longest stretch since at least 1999. In November, sales fell a bigger-than-expected 7.7% to 4.09 mln units annualized, the second-lowest level since 2010 (outside the pandemic). And, the pain was felt in all regions of the country, particularly the West (-12.5%). At least the price gains are slowing (now over 3% y/y, compared to over 25% gains in the spring of 2021) so "at a certain point, policy will be restrictive enough" (Powell last week), housing will be more affordable. Meantime, housing is clearly the lump of coal in the U.S. economy's stocking.

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Bottom Line: The U.S. economy's stocking had a mix of gifts and coal this year. We'll find out on Friday how personal spending and income fared but judging by this report, it looks like the consumer has been holding up fairly well, even as monetary policy continues to tighten.

Table 1 - United States — Consumer Confidence Index

(1985 = 100)

Source: BMO Economics, Haver Analytics

Table 2 - United States — Existing Home Sales

(millions of units : a.r.)

Source: BMO Economics, Haver Analytics