Don’t start waving the flags yet, but at least a few economic indicators are finally starting to edge upward.
For the second month in a row, Americans’ overall confidence in the economy increased, with job market expectations hitting their highest level in two years. The Conference Board Consumer Confidence Index, which had increased in November, rose again in December by 4.5%, to 52.9. This is higher than the reading expected by economists polled by Thomson Reuters, but still far from a score of 90 that would signify a solid economy. This same index was at its historic low of 25.3 in February.
Economists keep a close eye on consumer confidence since consumer driven spending is believed to account for approximately 70% of U.S. economic activity. Many retailers are just happy that the holiday season came through for them. According to figures from MasterCard Advisors, retail sales rose 3.6% from November 1 through December 24, compared to a 2.3% drop in that same period last year, although the gain drops to 1% if you adjust for the extra shopping day this year between Thanksgiving and Christmas. But consumers are still cautious about short term prospects, targeting discounted items and avoiding gift cards.
High unemployment is still a concern, for consumers and economists alike, and the feeling is that it could take years for the rate to come down to pre-recession levels. Unemployment hit a 26-year high of 10.2% in October, and, in spite of a small drop in November, there is concern among some analysts that it could rise to as high as 10.5% next summer. Still, payroll cuts have been decreasing, with November cuts of 11,000 jobs being the smallest since the recession began two years ago. And, although surveyed consumers say current conditions have gotten worse, they’ve also become a bit more optimistic for the coming six months, expecting more jobs to become available.