There was a striking figure in the latest Conference Board
US consumer confidence data – the headlines were all about the decrease on the month, but as always it pays to look beyond the the obvious and into the detail. The thing that stuck out to me was how optimistic consumers remain on the jobs market, as respondents say jobs are the most plentiful since the economic boom of the late 1990’s. In other words, if you ask the consumer they say the economy is booming. You find a similar thing if you ask small businesses who are reporting it hard to find workers. This is classic late-cycle economics: as the economic expansion matures, productive capacity struggles to keep up with demand growth. This usually ends up with higher wage growth, which ultimately leads to tighter monetary policy and pressure on corporate profit margins (and hence the beginning of the end of the cycle). For the Fed this means more of the same.
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