Jobs Data: Still the Albatross on Consumer Confidence

By David Parkinson

It's been a morning of unenthusiastic reactions to luekwarm U.S. economic reports. Why break the string just because one very important one beat expectations?

The Conference Board's index of U.S. consumer confidence came in at 49.5, up from an upwardly revised 48.7 last month and a couple of notches higher than the consensus estimate of 47.5. It's the first uptick in the Conference Board's index in three months.

That's good news, right? Heading into the all-important Christmas shopping season, a smile is beginning to creep onto shoppers' faces, isn't it?

Well, based on the market's response to the data, maybe not so much.

After getting an initial pop from the report, the major North American indexes have returned to waffling back and forth in modestly negative territory. The Dow Jones industrial average was off about 50 points, the S&P/TSX composite off 30 points.

Where's the problem?

Much of it lies in consumers' nagging doubts about jobs - still the biggest economic overhang for the market. The difference in the percentage of people saying jobs are hard to get (49.8 per cent) versus those saying they are plentiful (3.2 per cent) widened to its biggest gap in 26 years.

Another key is that the gains in the consumer confidence index all came in the "expectations" segment, while consumers' sentiment on the "present situation" actually slipped slightly. At a thin 21.0, the present-situation reading is at a new 26-year low.

Historically, the stock market has tracked the present-situation reading pretty closely, while showing little correlation with the expectations component. From that perspective, the modest improvement in the consumer confidence index is coming from all the wrong places for stocks.