Consumer Expectations Continue to Slip
Consumer confidence was a little firmer than expected Tuesday (3/31), but the expectations number dipped and with broadening weakness being seen in the jobs market, households remain wary, James Knightley, Chief International Economist, US, at ING said. Rising gasoline prices will put added pressure on household finances and hiring
Consumer confidence was a little firmer than expected Tuesday (3/31), but the expectations number dipped and with broadening weakness being seen in the jobs market, households remain wary, James Knightley, Chief International Economist, US, at ING said.
Rising gasoline prices will put added pressure on household finances and hiring could slow further given rising geopolitical and economic worries, he added.
Monday's data presented "a bit of a mixed picture, he said. "The Conference Board measure of consumer confidence was better than expected, rising to 91.8 in March from 91.0 in February. But that was due to the current conditions component rising to 123.3 from 120, while the more important expectations component fell to 70.9 from 72.0.
"Within this section, the outlook or the jobs market is darkening with only 15.4% of respondents thinking there will be more jobs in six months while 27.9% think there will be fewer with the balance saying no change. The current level of consumer expectations six months ahead has historically been consistent with consumer spending growth of around 1%."
Separately, job vacancies fell more than expected as quits and hiring both moderated. Job openings falling to 6.8 million in February from an upwardly revised January print of 7.2 million. There was also a pick-up in lay-offs to 1.72 million from 1.66 million, while the number of job hirings fell 503,000 in the private sector and the quits rate dropped to 1.9%.
None of this is good news for future wage growth, but that in itself will help to moderate second round price effects from higher energy costs, so the consolation is that it provides some comfort for the Federal Reserve, Knightley says..
Such a low quit rate implies very low worker turnover – so for employers there is no pressure to offer large wage increases to retain staff while there are now 0.91 jobs for every unemployed American.
Knightley says "the Fed is more likely to cut than hike interest rates." Why? If the jobs market had stalled when the economy was looking in decent shape before the Middle East conflict got underway, an overlay of heightened geopolitical, economic and market angst is not going to incentivise business to suddenly start hiring now.
