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Job Market Optimism Boosts Consumer Confidence

After dipping in April, the Conference Board's Consumer Confidence Index saw modest improvement in May as optimism for the job market grew.

The index rebounded to 83.0 in the latest reading, up from a downwardly revised 81.7 in April, the group reported Tuesday.

"Consumer confidence improved slightly in May, as consumers assessed current conditions, in particular the labor market, more favorably," said Lynn Franco, director of economic indicators at the Conference Board. "Expectations regarding the short-term outlook for the economy, jobs, and personal finances were also more upbeat."

The index component measuring confidence about current conditions rose nearly two points in the latest reading to 80.4, while the measure of expectations for the next six months improved to 84.8, an increase of just less than one point.

Compared to April, consumers' assessment of the current job market was more favorable, with more claiming jobs are "plentiful" and fewer saying work is "hard to get." However, the number of those with a pessimistic view of the labor market remains more than double the number of those expressing confidence, and economists Mark Vitner and Michael Brown at Wells Fargo's Economics Group say there are concerns about what "the lack of a ringing endorsement on the labor market" could mean for recent jobs numbers.

"The modest trajectory in the jobs are plentiful series ... casts serious doubt on the idea that hiring has accelerated in a major way, as the nonfarm employment data would appear to indicate," they said in a commentary, noting that plans for purchases in the coming months—including homes—have declined.

Meanwhile, both the number of consumers expecting more jobs in the months ahead and those expecting fewer jobs increased, further indicating uncertainty in the labor picture.

Nonetheless, the data points to increased spending in the current quarter, said Amna Asaf, economist atCapital Economics: "[A]t face value, the expectations index still appears to be consistent with a modest second-quarter consumption growth of around 2.5 percent annualised. But judging by the strength in the actual income and spending data, we would be surprised if it wasn't stronger."

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