Upbeat or Not? How Timing Influences Consumer Sentiment

One gauge of consumer confidence was released earlier this week showing a downbeat consumer concerned about the labor market. (from the Conference Board)

Another showed an upbeat consumer with a positive outlook on the economy. (from the University of Michigan).

The first survey was taken before the Fed rate cut and the second was after.

Lower interest rates boost intentions to purchase big ticket items like homes.

In fact, 55% of UofM respondents expect borrowing costs to decline in the coming year, the largest reading on record.

And even the Conference Board survey saw a rise in plans to purchase a home in anticipation of rate cuts.

While lower rates, moderating inflation, lower gas prices and still rising wages (even if slower than previously) bode well for consumer spending, the sharp decline in the expectations for the labor market shouldn't be brushed off.

The difference between those who see jobs as being "plentiful" and those seeing jobs "hard to get" is often a sign unemployment will rise. (p.s. Parker Ross has done great work on this correlation on X).

The steep drop in confidence among 35-54 year olds (again) is also unsettling.

That's when your career should be really heating up!

I suspect the stalling in the job market of late has something to do with 𝗲𝗹𝗲𝗰𝘁𝗶𝗼𝗻 𝘂𝗻𝗰𝗲𝗿𝘁𝗮𝗶𝗻𝘁𝘆 (among other things..). Even consumers called this out in Today's UofM survey: "…many consumers continue to report that their expectations “hinge on the results of the upcoming election," according to Joanne Hsu, director of the survey.

I'll continue to keep a close eye on the job market. In the meantime…

I remain optimistic that the job market is going through a recalibration that will result in a positive outcome for consumers, the economy and markets in the year ahead.

Chart credit to my pal Parker Ross (seriously give him a follow) and Arch Capital Group Ltd.

Related: The “You Can’t Undo It” Fear