Confidence Shaken Amid Early Tremors in Job Market

Source: Economics Group of Wells Fargo Bank, N.A. Summary Consumer confidence slipped slightly in May, and while the weakening may reflect short-term worries about the debt ceiling, the more interesting developments reveal how the sand is shifting under consumers’ feet. Worries about the labor market are growing as buying plans dry up. Sand is Shifting Consumer confidence slipped only slightly to 102.3 in May from an upwardly revised reading of 103.7 the prior month (chart). Amid worries about the debt ceiling and last week’s slip in the University of Michigan’s measure of consumer sentiment, expectations were for a bigger dip. It may be tempting to consider this yet another example of the staying power of the consumer, but pay attention to the sand beginning to shift under consumers’ feet. The three-legged stool that has propped up consumer spending in this cycle has been: (1) excess saving, (2) access to credit, and (3) steady gains in real income. Two out of the three are faltering as the pile of excess savings gets smaller each month and the latest data from the Federal Reserve showing credit standards tightening. Today’s confidence report points to potential trouble when it comes to that last leg, real income growth. READ FULL ARTICLE >>