The Conference Board’s Consumer Confidence Index slipped in May to 64.8 from 68.7 in the prior month. The sub-components of the index measuring the present situation (45.9 vs. 51.2 in April) and expectations of consumers (77.6 vs. 80.4 in April) declined in May. The current level of the Consumer Confidence Index is back to the mark seen in December. The Conference Board’s index is running counter to the improvement of the University of Michigan Consumer Sentiment Index (79.3 vs. 76.3 in April). Labor market indicators play a big role in the Conference Board’s Consumer Confidence Index compared with the University of Michigan consumer optimism gauge.

Speaking about labor market indicators, the percentage of respondents indicating that “jobs are hard to get” rose to 41 from 38.1 in April, while the percentage of respondents viewing “jobs as plentiful” dipped to 7.9 from 8.4 in the April. The net of these two indexes moved up to 33.1 from 29.7 in April. Historically, the net of these two indexes has a strong and positive relationship with the jobless rate. Based on this relationship, the unemployment rate for May could turn out higher than the 8.1% rate of April.

Our research shows that relationship between consumer spending and consumer optimism measures has changed over a period of time with the ties more tenuous in recent years. Nevertheless, the Fed frequently cites consumer optimism measures among the list of indicators used to assess the status of the economy.

House Price Index Maintains a Slow Improvement Trend

The Case-Shiller home price index rose 0.1% in March, after a 0.2% gain in the prior month. The back-to-back monthly increase is noteworthy because one gains of this sort were seen several ago, excluding the period when the first-time home buyer program was in place. On a year-to-year basis, the quarterly Case-Shiller home price index posted a 1.9% decline in first quarter (see Chart 3). The Corelogic Home Price Index shows a nearly similar improvement in the first quarter (-1.7%, see Chart 3).

On a month-to-month basis, Atlanta, Chicago, Detroit, and New York were the only four out of the twenty metro areas to post a decline in March. From a year ago, thirteen out of twenty metro areas posted declines in March. These numbers suggest that the coast is not clear yet with regard to home prices but changes are occurring in the desired direction.