Improved consumer confidence and gains in the private employment sector indicate an improving American economy, although first-time claims for unemployment benefits were higher than expected.
The Consumer Confidence Index jumped to 109.7, up from 90.4 in February, The Conference Board said Tuesday. Also on the increase are the two components of the Index. The Present Situation Index, measuring current business and labor market conditions, rose to 110.0 from 89.6 last month while the Expectations Index, a measure of consumers’ short-term outlook for the next six months for income, business and labor market conditions, climbed to 109.6 from 90.9 in February, signaling growth strength on the consumer spending front.
“Consumer confidence increased to its highest level since the onset of the pandemic in March 2020,” Lynn Franco, The Conference Board’s senior director of economic indicators, said. “Consumers’ assessment of current conditions and their short-term outlook improved significantly, an indication that economic growth is likely to strengthen further in the coming months. Consumers’ renewed optimism boosted their purchasing intentions for homes, autos and several big-ticket items.”
Franco noted that consumers are concern about inflation over the short-term, most likely because of rising prices at the gas pump, which could temper their spending plans in the months ahead.
More important, consumers are feeling more optimistic about the employment market, with 26.3 percent describing jobs as “plentiful, up from 21.6 percent. Even better, respondents who said they expect more jobs to become available in the months ahead jumped to 36.1 percent from 27.4 percent. Regarding short-term income prospects, 15.5 percent of respondents said they expect their incomes to increase in the next six months.
ADP data supports increased confidence on the jobs front. The payroll processing firm on Wednesday reported a 517,000 rise in March private payrolls, well above the revised February gain of 176,000 and marking the fastest increase since September, when payrolls expanded by 821,000.
By business size, small employers with 49 or fewer employees grew payroll by 174,000. Midsized employers with between 50 to 499 employees, added 188,000 while large employers with 500 or more on staff increased their ranks by 155,000.
On Friday, the Labor Department said American employers added 916,000 to their payrolls in March, representing the strongest hiring since August and almost double February’s gain of 468,000 jobs. The unemployment rate is now at 6 percent.
One hiccup on the labor front was the rise in first-time filers claiming unemployment benefits for the week ended March 25, which hit 719,000, up from the 658,000 filers the previous week. However, data showed a decline of 46,000 in continuing claims, bringing that total to just below 3.8 million. Continuing claims run a week behind the key first-time filers number. Thursday’s report on April 8 for the week ended April 1 could provide further clarity on the jobs front.
The Biden administration is firing on all cylinders to get vaccines to Americans and close in on herd immunity, which would significantly curb the coronavirus pandemic and potentially jolt the economy back to life. The National Retail Federation is forecasting annual retail sales in 2021 to grow between 6.5 and 8.2 percent, with growth expected to pick up steam in the middle of the year. A large component of GDP growth is consumer spending, which is expected to get a boost from job and wage growth during 2021.
Meanwhile, President Biden on Wednesday introduced a $2 trillion infrastructure and jobs package as an effort to reshape the economy, with a second component likely to be unveiled in the coming weeks.
Biden’s jobs plan includes repairing aging roads and bridges and overhauling the nation’s infrastructure, such as water systems. A total of $621 billion has been earmarked for transportation infrastructure, and includes $174 billion for spending on electric vehicles. The package includes $650 billion to overhaul the water systems, improve public housing, modernize schools and build high-speed broadband networks. Other components include $400 billion for home or community care for the elderly and individuals with disabilities, as well as higher pay for caregivers. And the final component calls for $300 billion to invest in manufacturing, along with some of the funding for research and development in the clean energy sector.
If the package can pass muster with Congress, the new jobs could shrink today’s 6.2 percent unemployment rate, which translates to 10 million individuals out of work.
Republicans aren’t expected to support the proposal, largely because tax increases are needed to pay for the plan. Biden’s plan would raise the corporate tax rate to 28 percent, or bring the percentage back to what it was before his predecessor, former President Donald Trump, implemented his tax cut plan in 2017. In addition to stopping profits form disappearing into tax havens, Biden’s plan would also do away with deductions by firms for offshoring jobs.
Senate Minority Leader Mitch McConnell (R-Ky.) has stated that he’s “not likely” to support the package because of the proposed tax increases. Senate Majority Leader Chuck Schumer (D-N.Y.) said he looks forward to working with Biden to pass a package that would “drive America forward for decades to come.”
Retail Industry Leaders Association (RILA) isn’t thrilled about the proposed corporate tax increases either.
“Retailers are strong proponents of the need for infrastructure improvements, particularly to the nation’s highways and ports which are overcrowded and underfunded. But how we pay for these investments needs to be carefully considered,” said Michale Hanson, the retail trade association’s senior executive vice president for public affairs. “Raising the corporate tax rate for all businesses isn’t the answer. Too many companies are currently paying little to no corporate income tax, while others pay full freight. This disparity needs to be addressed—whether its closing loopholes or reinstituting some form of minimum corporate tax—before raising the corporate rate a single point.”