Consumer Confidence: Is The Tail Wagging The Dog?

Real Estate Broker/Owner

Consumer confidence jumped from 40.8 in April to 54.9 in May, the largest one-month jump since April of 2003, according to Reuters.

In light of May's surge in consumer confidence as well as a deteriorating job market and housing market, it begs the question, is the tail wagging?

What I mean by this is that there are three things that people are going to be economically concerned with; their jobs, their homes, and their retirement or investment accounts.  These factors are going to drive consumer confidence.

We know that the job market, despite the government's best efforts to blunt the reports, is continuing to deteriorate at an alarming rate, shedding on average over 600K jobs over the past seven months.  So the job market has not improved.

We know that the housing market is continuning to deteriorate as is evidence by the latest Case-Shiller numbers as well as the bloated month's supply of housing.  So the housing market has not improved.

We also know that the stock market is no longer a reliable economic indicatorThe stock market has surged over the past month as a result of pent-up optimism more than anything else

So if the job market and housing market are not improving, then that would indicate that consumer confidence has surged directly as a result of a stock market rally which has virtually no economic foundation.

Comments (2)

Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Mark - Hmmmm?  It begs the question:  what else is driving the surge in consumer confidence?  There must be something else effecting it.

May 26, 2009 04:57 AM
John Mulkey - Waleska, GA
Housing Guru

Mark, I have to question just who are these people who feel more positive about the economy. It's certainly not those who have lost or are in fear of losing their jobs. It's not those who are underwater or facing foreclosure on their homes. It's not those who have seen their retirement fund lose almost half its value. I don't sense a rising tide of optimism when millions more foreclosures are predicted and when unemployment continues to climb to record levels--and, I just don't get it.

May 26, 2009 12:37 PM