PHOTO BY ZERBOR – STOCK.ADOBE.COMTwo key indicators of U.S. consumer confidence reached multiyear highs in January as the economy blew past expectations and added 353,000 jobs. The jobs gain was nearly double what economists had predicted. It was the largest increase in a year.
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The Conference Board said its Consumer Confidence Index rose to 114.8 from a downwardly revised 108 the previous month. The reading was the highest since December 2021.
“January’s increase in consumer confidence likely reflected slower inflation, anticipation of lower interest rates ahead and generally favorable employment conditions as companies continue to hoard labor,” Dana Peterson, chief economist at The Conference Board, stated in a press release.
“The gain was seen across all age groups, but largest for consumers 55 and over,” Peterson added. “Likewise, confidence improved for all income groups except the very top; only households earning $125,000-plus saw a slight dip. January’s write-in responses revealed that consumers remain concerned about rising prices, although inflation expectations fell to a three-year low. Buying plans dipped in January, but consumers continued to rate their income and personal finances favorably currently and over the next six months.”
A separate indicator of consumer sentiment also rose sharply in January. The University of Michigan said its Consumer Sentiment Index climbed more than nine points, to 79, after a reading of 69.7 in December.
“Consumer sentiment confirmed its early month reading, surging 13% to reach its highest level since July 2021, reflecting improvements in the outlook for both inflation and personal incomes,” Joanne Hsu, director of the university’s Surveys of Consumers, stated in a press release.
“January’s gain has been exceeded only five times since 1978, one of which was last month at an even larger increase of 14%,” Hsu added. “Consumers expressed gains in their views on their personal finances as well as the macroeconomy; the short-run business outlook soared 27%. After reserving judgment last fall about whether the slowdown in inflation would persist, consumers now feel assured that inflation will continue to soften.”
The Labor Department said the nation’s unemployment rate remained at 3.7% in January. The rate has been below 4% for two years, which is the longest period under those conditions since the 1960s.
The government revised upward its job totals for November and December. November’s figure is now 182,000, up 9,000 from the original data, and the December total is 333,000, up 117,000 from the initial report.
The government said the professional and business services sector added 74,000 jobs in January. Other notable increases occurred in health care (70,000), the retail industry (45,000), government employment (36,000), social assistance (30,000) and manufacturing (23,000).
“Remarkable, resilient and robust is the only way to describe the juggernaut that is the American labor market,” Joe Brusuelas, chief economist at the accounting firm RSM, tells the Washington Post. “We really are witnessing a historic recovery of the American economy following the shocks of the pandemic.”
“Given the Fed now wants strong job growth, as [Fed chairman] Jerome Powell told us [Jan. 31], this report should not discourage the Fed from cutting rates,” Chris Low, chief economist at FHN Financial in New York, tells Reuters. “By the same token, however, it is not going to encourage them to rush into rate cutting.”
A complete rundown of the U.S. economy will appear in the March issue of Soundings Trade Only.
