Look for sales, consumer confidence to strengthen
In late summer, turmoil in the global economy spilled into U.S. consumer demand as volatile markets and slowing job growth dampened consumption. A light week of economic news is expected to show that consumer spending and confidence at least partly rebounded in recent weeks.
The upswing, though, probably won’t be evident in the Labor Department’s report Thursday on openings, hiring and employee movements in the labor market. The Job Openings and Labor Turnover survey digs beneath the headline net job gains and the unemployment rate to reveal the market’s dynamics, but it’s released several weeks after the main payroll report. As a result, the release will reflect activity in September, when employers added a disappointing 137,000 jobs before busting out with 271,000 additions in October, according to estimates from Labor last week. In recent months, job openings hit record levels before slipping in August. Such business caution likely persisted in September. Meanwhile, hires and quits — which signify employees’ confidence in their ability to land another job — have steadily increased in recent years but remain below pre-recession levels. A surge in September seems unlikely, but October’s survey should paint a brighter picture.
Solid job growth, low gasoline prices and reduced household debt have supported consumer spending this year, more than offsetting the global troubles and softer business investment. Consumer spending, after all, makes up more than two-thirds of economic activity. But in September, the overseas weakness and falling stocks likely made shoppers jittery and contributed to a drop in a core measure of retail sales. Stocks bounced back smartly in October, and economists estimate the Commerce Department will report Friday that the key sales reading increased a solid 0.3% last month. “Consumer fundamentals continue to be favorable,” says Lewis Alexander, chief U.S. economist of Nomura.
Consumer confidence similarly rose in October as stocks rallied. Economists estimate the University of Michigan’s consumer sentiment index will show a further modest increase in its first estimate for November.
Despite healthy demand from shoppers, inflation has been held down by low oil prices and a strong dollar that makes imports cheap for U.S. consumers. The Federal Reserve is awaiting signs of a pickup in inflation to give it more evidence for a rate increase next month that would be the first in nine years. Economists estimate the Labor Department will report that wholesale prices rose 0.2% last month, but a core measure that excludes food and energy ticked up just 0.1%.