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Tuesday, November 29, 2011

Surge in November Consumer Confidence Not Such a Surprise

Guest post by Gallup Senior Editor Lydia Saad

The most surprising thing about the Conference Board's Consumer Confidence Index released Tuesday is that it came as a surprise to people who are supposed to be experts at following it.

As reported on "The Conference Board's Index increased to 56 from a revised 40.9 reading in October, the biggest monthly gain since April 2003, figures from the New York-based private research group showed today. The gauge, at a four-month high, exceeded the most-optimistic forecast in a Bloomberg News survey of economists."

Consumer attitudes about the economy have been slowly recovering since bottoming out in August. This has been seen consistently on Gallup's daily and weekly reports of Economic Confidence (see links to Gallup stories below), as well as in the Reuters/University of Michigan mid-month and final monthly Consumer Sentiment Index reports.

The Conference Board's Consumer Confidence Index normally tracks very closely with Gallup and Reuters/Michigan. In fact, its November index figure is in line with the magnitude of changes since August in both the Gallup and Reuters/Michigan indexes. The Conference Board's November result is only remarkable because of the decline that index posted in October. That is what made this month's return to an otherwise "normal" level of confidence appear so dramatic. 

The Conference Board and Reuters/Michigan indexes can have tremendous influence on U.S. equity values -- particularly on the days the indexes are released -- because the market views them as meaningful barometers of consumers' willingness to spend. However, a lot of emphasis is being placed on the shoulders of indexes that are each based on a single monthly sample of Americans.

Both the Conference Board and the Reuters/Michigan indexes have been around for decades, and for much of that time had an exclusive claim on consumer confidence-type data. But this is not 1970. In 2011 multiple consumer indexes are available, all largely tracking the same underlying public attitudes about the nation's economy.

Economists and others who follow the Conference Board and Reuters/Michigan closely must view these monthly reports in the context of all of the available confidence data, particularly Gallup's. Had the economists surveyed by Bloomberg done that, they could have easily forecast that the Conference Board was due for an upward correction and then some, after its aberrantly low October result. In fact, the median projection issued by the 70 economists polled -- 44 -- suggests a lack of awareness of all available data that could help understand trends in consumer confidence.

"The median projection in the Bloomberg survey called for a confidence reading of 44. Estimates of 70 economists ranged from 37 to 49.6."

Over the past month, Gallup has been telling a consistent story of modestly improved consumer attitudes, both in terms of their confidence in the economy, and in their spending.

All of this appears to be borne out by the healthy increases in Black Friday and Thanksgiving weekend retail sales as reported by ShopperTrak and the National Retail Federation. That information was in the news on Monday and helped send the Dow Jones Industrial Average up nearly 300 points by the close of trading. Whether the Conference Board's report on Tuesday warrants further increases on Wall Street is debatable.

According to Gallup Daily tracking, Americans' economic confidence at the end of November is barely higher than it was at the beginning of the month, following the more significant gains seen between October and the start of November. However, Conference Board reports can alter reality. If Wall Street remains bullish because it believes consumer confidence is now improving, consumer attitudes could follow suit.

To stay up to date on this and Gallup's other economic confidence metrics, bookmark these important links:

Daily: Employment, Economic Confidence and Job Creation, Consumer Spending
Weekly: Employment, Economic Confidence, Job Creation, Consumer Spending
Read more about Gallup's economic measures.
View our economic release schedule.

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Friday, November 4, 2011

Real (Unadjusted) Unemployment Best in Two Years

This is the best time to look for a job in more than two years -- although you wouldn't know it from the government's most recent unemployment report. Today the government reported that the not-adjusted unemployment rate fell to 8.5% in October, down from 8.8% in September, and continuing a steady decline from 9.3% in July -- and was the lowest unadjusted unemployment rate reported by the government since January 2009. Gallup reported a similar not-seasonally-adjusted unemployment number beginning in mid-October and on Thursday noted that the month ended at 8.4%.

The government's own numbers show that the number of employed Americans increased by 485,000 in October from September 2011 following an increase of 267,000 in September from August.

All of this is hidden because this is BLS household survey data, and most observers focus on what is reported in the survey of businesses known as the BLS establishment survey. The real unemployment situation is also disguised as the BLS adjusts the data for seasonal hiring in an effort to reveal what some might consider the underlying trend.

Given the length of the current recession/slowdown, observers can argue over seasonal adjustments and how they are used for analytical purposes. Regardless, it is clear that Americans are telling Gallup and the BLS that companies are hiring right now and the real (unadjusted) unemployment rate is at its lowest point in more than two years. While this may turn out to be temporary, it is also a tidbit of sunshine that the millions of unemployed and underemployed Americans deserve to know is happening.

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