Tuesday, December 28, 2004

Ho-hum. A mighty slow news day on the political economy front. I've noticed that some of the big boys (Brad DeLong, Angry Bear) even seem to be taking an extended vacation. But not General Glut! No sir-ee!

Of course, not taking a vacation during a slow news period means a lot of scratching in the dirt like chickens trying to dig up something interesting to talk about. Well, how does this kernel of corn grab ya?
U.S. consumer confidence jumped in December to a five-month high, beating even the most optimistic forecast, as more Americans said jobs were plentiful and the outlook for the economy brightened.

The reading of 102.3 in the Conference Board's index followed a revised 92.6 in November, which was stronger than first reported. Expectations for the economy over the next six months also climbed to a level that was last exceeded in July.

``We expect the consumer to roll into 2005 on a high note, as hiring is poised to accelerate and income gains will pick up as well, while gasoline and heating oil will take a smaller bite out of pocketbooks,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. His forecast of 98 for the index in December was the highest in a Bloomberg News survey of 51 economists.

Today's report suggests that spending by U.S. shoppers will contribute to the economic expansion into the first half of 2005. More consumers in the survey expected their incomes to rise in the coming six months, and a larger percentage expected to buy appliances, automobiles, and houses.
So why are US consumers so -- well -- giddy? Apparently lots more of them think jobs are plentiful and pay is growing at a healthy clip.

The actual data and the economists' forecasts don't seem nearly so rosy, however. Granted the December data on jobs and personal wage/salary income won't be out until January 7 and January 31 respectively, but the latest trends don't exactly cry out for optimism.

Over the last six months, seasonally adjusted job creation has exceeded 200,000 only once (October), and only twice (August and October) has it even exceeded growth in the working age population. Over the last six months the average monthly number of jobs created is 152,000 -- or just barely keeping up with population growth. According to economists surveyed by Bloomberg, the December jobs numbers are going to come in around 175,000. For sixteen months after the jobs trough, this is still a pretty pathetic number.

In November 2004 real wages and salaries rose just 0.1%, the smallest real gain since they actually fell in June. The annual rate of real wage/salary growth in November was 1.9%. This is certainly better than the declining real wages and salaries of 2001, 2002 and early 2003, but it is the second lowest figure in over a year. No word yet on what the forecast is for December, but obviously many more folks think les bons temps are only just startin' to roulez.

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