Consumer sentiment jumped higher in early June as Americans saw signs of an improving labor market.
The University of Michigan’s index of consumer sentiment posted its second monthly gain on Friday, rising higher than economists had expected. Economist had forecast a rise to 75 from May’s 72.3. The index rose to 78.9, with gains in both in the current situation and expectations components.
“The turnaround is largely due to renewed gains in employment, with more consumers expecting declines in the jobless rate than at any other time in the long history of the Michigan surveys,” said Richard Curtin, the survey’s chief economist.
Last week, the Labor Department said that the U.S. economy added 2.5 million jobs in May, defying economists forecast for a loss of 8 million jobs. The unemployment rate improved from 14.7 percent to 13.3 percent, contrary to expectations for a rise to close to 20 percent.
Yet consumers are still wary that a second wave of infections could once again throw the economy into turmoil.
“Bad times financially in the economy as a whole during the year ahead were still expected by two-thirds of all consumers, and a renewed downturn was anticipated by nearly half over the longer term. The most often cited cause of a renewed downturn is a resurgence in the spread of the coronavirus,” Curtin said.
And many consumers are worried that, despite early signs of recovery in the jobs market, high levels of unemployment could drag on the economy for months to come.
“The resulting record level of income uncertainty has had a significant impact on consumers’ willingness to make discretionary purchases, although uncertainty has slightly eased recently,” Curtin said.
Low inflation, falling prices, and interest rates near zero have somewhat offset the uncertainty, however, according to Curtin.
The index’s current conditions gauge rose to 87.8 from 82.3, a stronger than expected gain but still 21 percent below the year-ago level. The expectations gauge also rose by more than expected, to 73.1 from 65.9. That is 18.1 percent below last June.