Resilient consumers foresee more jobs, if not better pay - Trade Only Today

Resilient consumers foresee more jobs, if not better pay

One thing we know as the new business year begins is that American consumers retain their optimism about the economy.
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One thing we know as the new business year begins is that American consumers retain their optimism about the economy.

The public’s mood showed solid improvement in The Conference Board’s December report. The Consumer Confidence Index rose to 96.5 from 92.6 in November as the percentage of people who expect the U.S. economy to create more jobs rose from the month before, although the proportion of consumers who expect their own income to increase declined.

“As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement.

“Looking ahead to 2016, consumers are expecting little change in both business conditions and the labor market. Expectations regarding their financial outlook are mixed, but the optimists continue to outweigh the pessimists.”

We won’t have to wait long to see whether people’s confidence in an improving job market is justified. The Labor Department’s report on December payrolls will be released Friday, and Business Insider says economists estimate that the nation added 200,000 jobs and that average hourly earnings rose 0.2 percent month over month, which would be 2.8 percent year over year.

The unemployment rate is expected to stay at 5 percent.

Ahead of the job data, Reuters said Monday that two reports showed U.S. manufacturing remains stagnant.

The U.S. Institute for Supply Management said its index of national factory activity fell to 48.2 from 48.6 in November and is at its lowest level since June 2009. A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 connotes contraction.

Private data vendor Markit reported continued expansion in manufacturing, but at a slower pace. Markit's purchasing managers' index fell to 51.2 from 52.8 in November, which Reuters said was the lowest since October 2012.

Additionally, the Commerce Department said U.S. construction spending fell for the first time in nearly a year and a half in November, dropping 0.4 percent after a 0.3 percent gain in October.

Today economy watchers will see the December report on car sales. A monthly forecast developed jointly by J.D. Power and LMC Automotive predicts that new light-vehicle sales will be the strongest for any month since 2005.

Full-year sales are on track to set an annual record of 17.5 million, J.D. Power and LMC said.

New-vehicle retail sales in December are projected to reach 1.4 million units and total light-vehicle sales are expected to reach 1.7 million, both a 6 percent increase on a selling-day-adjusted basis, compared with December of 2014.

“With continued record transaction prices, consumers are on pace to spend more than $44 billion on new vehicles in December and $437 billion on new vehicles in 2015, both record levels,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power.

The previous record of $407 billion in annual consumer expenditure was set in 2014.

“The Federal Reserve’s increase in interest rates … should have a minimal impact on new-vehicle sales,” Humphrey added.

On Wednesday the Federal Reserve will release the minutes from its historic Dec. 15-16 meeting, when it raised interest rates for the first time in seven years. The Fed has said future hikes will be gradual, and Fed watchers will parse the minutes to see what members of the Federal Open Market Committee envision such a pace to be and the factors they consider most important going forward.

Fed vice chairman Stanley Fischer said during the weekend that the central bank might need to raise rates further if financial markets overheat.

“If asset prices across the economy — that is, taking all financial markets into account — are thought to be excessively high, raising the interest rate may be the appropriate step,” Fischer said in a speech at the annual American Economic Association meeting in San Francisco on Sunday.

Bloomberg reported that Fischer did not address the current state of financial markets. Others, such as Fed chairman Janet Yellen, have indicated that they do not see the markets, on the whole, as being overheated.

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