U.S. consumer confidence improves to highest level in more than a year

REAL ECONOMY BLOG | November 26, 2024

Authored by RSM US LLP

Consumer confidence edged up in November to its highest level in more than a year, driven by improved sentiment about both the current economic situation and future expectations. The consumer confidence index rose to 111.7 from an upwardly revised 109.6, the Conference Board reported on Tuesday.

The main driver of the increase in confidence continues to be better labor market conditions, as survey respondents noted that new jobs were less difficult to find this month. Together with the subindex for jobs remaining plentiful, the labor differential subindex—one of the key indicators we focus on—reached its highest level since June.

The back-to-back rebound of the labor subindex from September’s low is a sign that the labor market should rebound strongly in November after a disappointing October report, which can be attributed to one-time shocks. We expect the unemployment rate to remain at 4.1%, while the net payroll number should increase to between 150,000 and 200,000.

The overall improvement in confidence also signals that consumer spending, fueled by a strong labor market, should continue for the remainder of the year. This sets the stage for stronger growth next year, as outlined in our year-ahead forecasts.

One factor fueling this increased confidence is the decline in inflation expectations for both the short term and long term. But these expectations are at odds with the anticipated stronger growth, which will likely bring higher inflation.

Consumers’ expectations about inflation won’t shift significantly until we have a clearer picture of how higher tariffs and tighter immigration policies will play out in practice.

In the meantime, these lower inflation expectations should continue to support robust consumer spending.