Consumer confidence in the economy rose for the first time in three months, according to the Conference Board’s monthly report. report. Two paradoxical groups emerged with the highest levels of trust: one inclined to isolate itself from economic worries. And the second one, which is often a model for them.
Both wealthy people earning more than $100,000 a year and young adults, defined as those under 35, had the highest levels of consumer confidence, according to the six-month average. The rise in confidence among wealthier households can be attributed to the stock market boom, said Conference Board senior economist Stephanie Guichard. Luck. While high levels of consumer confidence are common among young people, the Conference Board’s research has taken on new significance given that consumers across the country have had a largely negative outlook on the economy in recent months.
Even after the gains the Conference Board showed in Tuesday’s report, overall consumer confidence is at one of its lowest levels since 2021. 2022. Inflation has eased from June 2022 highs. The unemployment rate did not skyrocket as it usually does when the Federal Reserve takes steps to reduce inflation. And in the labor market, wages are still relatively high.
Consumers may recognize that things are better than they were during the pandemic, but they still find it difficult to see meaningful progress in the cost-of-living struggles that are affecting their daily lives. Inflation has eased but not returned to manageable levels as grocery store prices continue to shock shoppers. Mortgage rates have become prohibitively high, reaching 7% last month, putting home ownership out of reach for many.
According to Guichard, the increase in confidence of the rich can be attributed to the stock market. “The stock market fell in April and we saw a decline in confidence in strong earnings,” Guichard said. “The stock market has rebounded this month and we have seen a strong recovery in consumer confidence.”
Wealthier people often have more money invested in market investments and instruments, meaning any change in stock prices can have a major impact on their personal finances. At the beginning of this year report found that the richest 10% of households own 93% of stocks and mutual funds.
While the explanation for why the confidence level of wealthy people increased has been clearly identified, the reason why it did so for young people remains a mystery. Data provided by Guichard shows that this has been the case since May 2023. And in an interview, Guichard said that, with the exception of “very rare cases”, this has been the case since 1996.
But these results seem to contradict other studies. A report Consulting firm Deloitte found that the top concern for both Generation Z and Millennials is the current cost of living. Both groups were unsure whether or any other economic problems would improve. According to a Deloitte study, only 32% of Gen Z said they expect the “overall economic situation to improve,” while 31% of millennials said the same. Some millennials have faced such deep levels of economic uncertainty that it has left them depressed. Even those who handled the situation with equanimity were left with the feeling that American dream– hard work that pays off with a life of financial security – was false promise.
The exact reason why some under 35 are so confident about the economy is unclear, Guichard said. Other studies point to some possibilities. One explanation is that millennials tend to feel better about their finances when they receive financial help from their parents. Millennials will also benefit from a huge transfer of wealth when their boomer parents leave them significant inheritances. Both will provide young people with an immediate influx of money, but they are unlikely to be repeatable economic trends.
Another explanation is that the labor market remains strong. The unemployment rate is only 3.9%, and there have been more open jobs than people employed for many years. All this means that even young workers in the early stages of their careers feel that they can achieve even the slightest professional advancement. If any promising labor market data turns sour, young people could start to blight the economy, Guichard says.
Based some Economists predict that this will happen later this year, which could disappoint even seemingly eternally confident young consumers.