An obscure and arcane economic indicator suggests that Federal Reserve Chairman Jerome Powell was wrong when he said at his Nov. 30 news conference that “There is a path to a soft, a softish landing” for the U.S. economy. This indicator traces to the large divergence between consumers’ views about the economy in general and their immediate personal financial circumstances in particular. A recession has occurred each time over the past four decades in which this divergence even approached its current level.
To measure this divergence, this indicator focuses on the Conference Board’s Consumer Confidence Index (CCI) and the University of Michigan’s Consumer Sentiment Survey (UMI). While there is some overlap between what these two indices measure, there is a significant difference in emphasis, according to James Stack of InvesTech Research, from whom I first heard about this indicator. The CCI more heavily reflects consumers’ attitudes towards the overall economy, according to Stack, while the UMI is more heavily weighted towards their immediate personal circumstances. Perhaps not surprisingly, the CCI currently is higher than the UMI. Even as American consumers’ attitudes towards their immediate financial situations continue to sour, due to everything from inflation to higher mortgage rates to a softening housing market, the overall economy has proven to be remarkably resilient. Yet more evidence of this resilience was the Dec. 2 jobs report, in which the Labor Department reported the creation of a much-higher-than-e …