Consumer Sentiment:  Strong and A Theory on Wage Gains

Bottom Line: Consumer sentiment remained near record levels but dimmed just slightly as interest rates hampered consumers' outlooks for durable goods purchases. The survey's economists suggest this month that continued strong job prospects are driving optimism. Additionally, they hypothesize that job security is more important to consumers than it would normally be at this point in a boom cycle. They note the gap between unaided references to jobs in the survey and nonfarm payroll -- the references to jobs would normally have equated with stronger payroll growth (see second chart below). They note that this could also be one reason wage growth is not stronger, as employees are still just happy to have secure jobs and are less willing to seek higher wages than at similar points in prior economic cycles, a potential lasting symptom of the Great Recession. Consumer Sentiment was REVISED DOWN by 0.4 points in late October to 98.6%, compared with market expectations for no change to 99.0%. Sentiment has improved by 0.7 points over the past 3 months. Despite this month's slight decline, compared to September's final level of 100.1%, sentiment is 2.1% BELOW its year ago level. Current Conditions were REVISED DOWN by 1.3 points to 113.1%. Current conditions are now 2.9% BELOW their year ago level. Consumer Expectations were REVISED UP by 0.2 points to 89.3%. Despite this month's slight decline, compared to September's final level of 90.5%, expectations are 1.3% BELOW their year ago level.