Brighter view on jobs and pay lifts U.S. confidence
WASHINGTON — Americans are more optimistic the job market is healing and will deliver higher pay later this year. That brighter outlook, along with rising home prices, cheaper gasoline and a surging stock market, could offset some of the drag from the recent tax increases and government spending cuts.
A gauge of consumer confidence rose in April, reversing a decline in March, the Conference Board, a private research group, said Tuesday. The board attributed the gain to optimism about hiring and pay increases. Economists also cited higher home values and record stock prices.
A separate report Tuesday showed that home prices nationwide rose in February by the most in nearly seven years. The Standard & Poor’s/Case-Shiller 20-city index jumped 9.3 percent in February from a year earlier. Prices in all 20 cities rose on an annual basis for a second straight month.
Phoenix led all cities with a year-over-year price gain of 23 percent. Floyd Scott of Century 21 Arizona Foothills in Phoenix, said demand is particularly strong for homes priced below $300,000. Because of a tight supply, homes for sale are routinely receiving multiple offers, he said. That’s driving prices up.
The reports were released the same day the Federal Reserve’s policymaking committee began a two-day meeting. Analysts expect the Fed to announce today that it will maintain its low interest rate policies, which include an $85-billion-a-month bond-buying program that’s intended to keep interest rates low to spur borrowing, spending and investing.
Big changes in government policy have caused sharp swings in consumer sentiment in recent months. Social Security taxes rose 2 percentage points Jan. 1, lowering incomes for a typical household earning $50,000 by about $1,000 this year.
And across-the-board government spending cuts that began taking effect March 1 forced many federal agencies to furlough workers, which reduced their incomes. Government contractors are also likely to reduce jobs in response to the government cuts.
Yet consumers have shown resilience.
But economists caution that confidence typically fluctuates. Measures of consumer sentiment have yet to show consistent month-to-month increases.
“While expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend,” said Lynn Franco, the Conference Board’s director of economic indicators.