Jobs Growth In May Likely To Buoy Rising Consumer Confidence

Let’s hope we don’t get fooled again. The U.S. economy, at least as measured by jobs growth and consumer confidence, finally seems to be gaining some traction. Nonfarm payroll employment posted another moderate gain of 175,000 jobs in May and over the past 12 months has averaged 172,000 new jobs monthly, according to the latest report from the Bureau of Labor Statistics, released June 7. The unemployment rate, based on the household survey, remained essentially unchanged at 7.6%, as discouraged workers continue to very slowly re-enter the jobs market.

These numbers are likely to continue to fuel gains in consumer confidence, which has rebounded since the first quarter “fiscal cliff”/payroll tax hike/gasoline price increase damper. The Thomson Reuters/University of Michigan Consumer Sentiment Index hit its highest level since July 2007 in the final May reading, released May 31. And The Conference Board’s Consumer Confidence Index also surged 7.2 points in May.

Among the segments showing big job gains in May was employment at foodservice and drinking places, which added another 38,000 net jobs during the month and has now added 337,000 new jobs during the past 12 months. Professional and business services saw a 57,000 job gain for the month. Such employment has been a leader during the slow economic recovery. The segment has added 589,000 new jobs during the past year.

Not that the May report was all sweetness and light. The federal government, dealing with the budget sequester, shed 14,000 jobs last month, though when state and local government employment is figured in, overall government employment losses were 8,000 for the month. During the last three months, the federal government has lost 45,000 workers. Manufacturing employment was also off 8,000 jobs.

But rising home prices, the surge in the equity markets, the slow if steady improvement in the jobs outlook and other economic good news seems to finally have consumers across all income classes feeling better about their economic prospects.

“The overall mix of economic news recently heard by consumers was the most positive it has been in the past ten years,” stated the UM Consumer Sentiment release for May, “leading households to adopt the most improved outlook for the national economy since 2007.” We can hope the optimism holds as the economy continues its painfully slow recovery.