Jobs Outlook Boosts Consumer Confidence

The consumer confidence index rose to 81.4 percent from last month's reading of 74.3 percent.

Consumers remain confident about the economy, but this time it’s due to their outlook on the jobs market.

According to Conference Board, consumer confidence rose for the third consecutive month as their assessment of current conditions and expectations for short-term outlook improved in June. Key is the outlook for the labor market, with more respondents in the Board’s consumer confidence survey for the first time since February 2012 stating they expect more jobs than those saying they believe there will be fewer jobs.

That outlook pushed the consumer confidence index to 81.4 from 74.3 last month, the highest reading since January 2008. That’s still below the index reading of 90 that is considered that of a healthy economy. The last time that reading was reached was in December 2007. In this month’s survey, the present situation index rose to 69.2 from 64.8 in May, while the expectations index rose to 89.5 from 80.6.

Lynn Franco, director of economic indicators at The Conference Board, said, “Consumers are considerably more positive about current business and labor market conditions than they were at the beginning of the year. Expectations have also improved considerably over the past several months, suggesting that the pace of growth is unlikely to slow in the short-term, and may even moderately pick up.”

As for the jobs outlook, consumers who said jobs are “plentiful” increased to 11.7 percent from 9.9 percent. In comparison, those who said jobs are “hard to get” inched up to 36.9 percent from 36.4 percent. Over the next six months, respondents who said they anticipate more jobs rose to 19.6 percent from 16.3 percent. Those forecasting fewer jobs declined to 16.1 percent from 20 percent.

Also likely helping the confidence trend for the last few months has been the steady rise in home prices.

Economists at IHS Global Insight said seasonally adjusted prices were up in all 20 cities in its composite index for the fifth consecutive month. They explained that home prices are going up because of shortages, and that while last month’s tracking index was the strongest in years, the one for this month was even stronger. They also said that as prices go up, more homeowners will list their homes.

While the availability of jobs have historically been considered a a key factor in consumers’ willingness to spend, rising home prices also contribute to the wealth effect. Consumers who feel wealthier and believe they will have jobs become more confident about spending.