Consumers' confidence in the economy moved closer to a 5 1/2-year high as a result of growing optimism that wages and hiring will improve in the next few months.
The Conference Board, a New York-based private research group, reported Tuesday that its consumer confidence index rose to 81.5 in August. Thats up slightly from a revised 81 reading in July. It's also just below the 82.1 reading in June, the highest since January 2008. The reading has yet to return to the 90 mark that signals a healthy economy but is much improved from the 25.3 reading seen at the depths of the Great Recession in February 2009.
Americans confidence jumped in June on hopes that the job market was starting to turn around. The economy has created an average of 192,000 jobs a month this year, slightly ahead of last years pace. The unemployment rate fell last month to a 4 1/2 -year low of 7.4%. But unemployment remains high four years after the recession officially ended and employers added just 162,000 jobs in July, the fewest in four months. That raised worries that the sluggish economy could slow any progress made earlier in the job market.
Consumers confidence in the economy is closely watched because spending accounts for an estimated 70% of U.S. economic activity. While consumers were more confident about the future, their assessment of the economy dipped slightly in August.
Consumers income expectations, which fell earlier this year after a January tax hike, rebounded to the highest level in 2 1/2 years, said Lynn Franco, director of the Conference Boards economic indicators.
The economic recovery has stalled this year because of tax hikes, federal spending cuts and weaker global growth. The economy expanded at a 1.7% annual rate in the April-June quarter. Most economists expect that figure will revised up to a 2.2% annual rate, mostly because of a jump in June exports.