More and more Americans think they are due for a raise as income-growth expectations just hit the highest point in twelve years.
Consumer sentiment increased at the start of May, and Americans’ outlook of the future of the jobs market hit its highest mark in 12 years, according to the Survey of Consumers conducted by the University of Michigan.
The index of consumer expectations increased slightly to 97.7 in early May, up 0.7% from April’s 97 and up 3.2% from 94.7 in May of last year.
“Consumer sentiment remained on the high plateau established following Trump's election, with the early May figure nearly identical with the December to May average of 97.4,” Survey of Consumers Chief Economist Richard Curtin said. “The Trump bump was relatively small given that the Sentiment Index averaged 91.8 in the comparable six month period a year ago and 94.5 in the same period two years ago.”
An article by Jill Mislinski for Advisor Perspectives explains what this means historically:
The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.
However, Curtin points out the stability in the index masks two underlying shifts in the components.
“More favorable income gains and low inflation meant that consumers held the most favorable real income expectations in a dozen years,” Curtin said.
“Buying plans, however, were mixed: household durables rose to a decade peak, while vehicle buying conditions slipped to a three year low,” he said. “Home buying conditions were viewed less favorably, but were offset by the most favorable views about home selling in more than a decade.”
The Current Economic Conditions part of the index held steady at 112.7 in May, but this is up 2.5% from 109.9 last year.
The Index of Consumer Expectations increased to 88.1, up 1.3% from last month’s 87 and up 3.8% from 84.9 in May 2016.
And the partisan divide, while remaining strong, is slowly diminishing. The divide in the expectations index narrowed from a 65-point difference three months ago to 55 points this month.
Curtin explained this is, “Mainly due to Democrats expressing diminished fears of an immediate recession and lessened concerns about personal financial setbacks. Overall, personal consumption expenditures are expected to advance at about a 2.3% pace in 2017.”