Is rising consumer confidence coming from the elderly and the less educated?

by on May 3, 2017 at 3:04 am in Data Source, Economics, Education, Political Science | Permalink

Americans with degrees have been getting steadily less optimistic since mid-2015…

Americans without degrees are as optimistic now as they’ve ever been since the survey began nearly four decades ago. Only the peak of the tech bubble compares. By contrast, Americans with degrees are about as confident in the future as they were in September 2007, when the credit crisis had already begun…

Since the start of 2015, the outlook among the young has deteriorated sharply, albeit from a high base. Meanwhile, the expectations of Americans ages 55 and older have soared in the wake of the election to their highest level in more than fifteen years…

And this in sum:

The groups responsible for the aggregate change in sentiment are the least likely to experience big real wage increases and therefore the least likely to boost their spending. Moreover, they appear unwilling to translate their vague optimism about the future into specific expectations about behaviour.

So even if those expectations were reliable guides to the actual choices people make — something strongly debated among forecasters — there is little reason to believe the “Trump bump” in consumer sentiment is a harbinger for sharply rising real spending.

That is all from Matthew C. Klein.  I would stress the broader point that in a polarized time such survey results may not be very reliable at all, and perhaps we should dismiss the pessimistic responses of the young as well.

1 Thanatos Savehn May 3, 2017 at 3:40 am

The practical impossibility of ceteris paribus: a degree in Anthropology (which discipline renounced the scientific method years ago) is not the same as a degree in electrical engineering (wherein a system failure is a one way ticket back to Starbucks) – no matter how much Tyler’s academician union wishes it were otherwise.

2 Ray Lopez May 3, 2017 at 9:48 am

Well said. Social “science” is not really science. I think there’s a confounding variable in the study: as the US population gets more rich and more elderly, and wealth is concentrated in the 1% (minimum net worth over $9M, my family is in it), Americans tend to spend less (you’d never know we were in the 1%, the way we dress and drive), as is well known. Peak spending happens in middle age, and in rising youth, not when you’ve made it (credit companies hate us, as do banks, since we have no need for debt; and our real estate we buy in cash, just writing a check). So the conclusions behind the study have nothing to do with the 99% uneducated poor’s optimism, which is irrelevant, but the opposite.

But TC is right about youth being unduly pessimistic. Marketplace lead headline today: “Millennials ought to be 100% invested in stocks, says top-ranking newsletter editor Published: May 3, 2017 6:59 a.m. ET

Bonus trivia: my family’s individual stock portfolio, well over $1M (they hate stocks, I wish it was bigger; not counting IRAs) has a beta of nearly 2. So during bull markets like now it really flies high. Lots of high dividend but dicey IMO stocks like T (AT&T) comprise it. The only one I like are mutual funds like TriContinental. Our IRR over the last twenty years, I just calculated it, is over 6%, not bad (marque DC real estate really helps), which means roughly we double our money every decade. Wish it was higher but like TC says we have a Great Stagnation. Bummer. Better patent laws would fix that…

3 Troll Me May 3, 2017 at 10:02 am

Step 1) Hypothesis

Step 2) Observe things, possibly after an experiment, or instead in “field” conditions

Step 3) Formulate theory

Step 4) Put theory into the world

Step 5) Wait to be ripped to shreds

Step 6) New hypothesis in view of 5).

What’s not scientific about that? The scientific method never guaranteed the right answer. It guarantees a mechanism to identify a wrong answer.

4 wiki May 3, 2017 at 10:09 am

Then by that standard all the social sciences and things like climate change are not science since they are reluctant to admit when they are ripped to shreds. And in the case of climate science, they acitvely demonize those who would even mildly question the consensus.

Ironically one of the most contentious of the disciplines — economics — is also one of the most tolerant of differing opinions and delights in rippng to shreds the ideas of their own friends and colleagues.

5 Troll Me May 3, 2017 at 11:52 am

Claiming the ability to rip is not evidence of the ability to rip.

Rip away.

6 Troll Me May 3, 2017 at 11:52 am

The delight is related to the prospect for improved outcomes via superior methodology. Not status games (except maybe a bit).

7 Gerber Baby May 3, 2017 at 12:20 pm

No, the method is thus:

1. Start with series of disproven, blank-slatist assumptions.

2. Formulate theory based on those assumptions.

3. Make unscientific experiment designed to confirm that theory.

4. Hope no one tries to replicate your experiment.

5. Profit.

8 Golden Elephant May 3, 2017 at 3:53 am

Dumb people and teens are the ones who believe the hype…

9 Dick the Butcher May 3, 2017 at 8:02 am

Why has higher consumer confidence not been reflected in higher consumer spending and GDP growth?

Which group has more disposable income/money, the young with degrees or the elderly and less-educated?

10 Gerber Baby May 3, 2017 at 12:25 pm

Your reading comprehension isn’t great, smart setter.

11 prior_test2 May 3, 2017 at 4:56 am

‘and perhaps we should dismiss the pessimistic responses of the young as well’

Because they didn’t read The Great Stagnation, or because they did?

12 chuck martel May 3, 2017 at 6:14 am

” there is little reason to believe the “Trump bump” in consumer sentiment is a harbinger for sharply rising real spending.”

Encouraging the proles to spend their last dime and borrow to spend even more has been successful to a remarkable degree. Credit card debt in the US, for instance, now totals about $800 billion while the country’s total household indebtedness amounts to almost $13 trillion dollars. How much more do you want?

13 Dick the Butcher May 3, 2017 at 8:13 am

Some I read are concerned over huge amounts of student debt and subprime automobile loans.

Public sector debt also is noteworthy. Federal debt is approximately 80% of GDP. At the time of Reagan’s 1986 tax reform it was 25%. Historically, Fed government debt decreased by 25% (to GDP) six to seven years after a financial crises. The reverse happened during the amazing Obama/Bernanke years. .

I’m uncertain that 0.7% 1Q2017 GDP growth is “successful to a remarkable degree.” And, I think consumer debt is slightly lower than the run-up to the recent subprime crisis/great recession.

14 rayward May 3, 2017 at 6:16 am

Tomorrow will be just like today, only more so. Of course, it’s human nature to believe it, and it’s human nature to believe all kinds of fantastic things. As with so much in life, timing is very important. As seniors approach retirement the timing is just right to downsize, to sell the house and maybe some investments at the top of the market. At the other end of the age spectrum, the young are old enough to know that what goes up must come down, and it will come down on them. Those without degrees don’t know the difference between up and down.

15 chuck martel May 3, 2017 at 6:47 am

“Those without degrees don’t know the difference between up and down.”

Only the holders of a printed sheepskin are consequential. There’s no real education in living real life, learning occurs exclusively through organized institutional instruction where the concept of up vs. down is given through subtle yet effective teaching, preferably by tenured professors rather than teaching assistants.

16 kris May 3, 2017 at 11:26 am

Point taken. But degrees are still (barely?) a proxy for intelligence.

17 Troll Me May 3, 2017 at 11:54 am

Comformity with regard to things like able to follow through on a commitment to meeting a deadline, showing up, etc.

Certain types of academcally-oriented abilities will presumably have fairly high relevance as well. But it’s a lot more related to the habit of trying, and more importantly doing so in advance with a realistic view to what can be done.

18 Thomas May 3, 2017 at 12:31 pm

You are a perfect example of the fact that “degreed” doesn’t equal “intelligent”. Look up the sheepskin effect, you non-peer ambulance chaser.

19 Jan May 3, 2017 at 6:42 am

How does this compare to the confidence stats in Russia?

20 Bill May 3, 2017 at 8:02 am

You can see a lot in the current trend in auto sales matched against consumer confidence.

21 Bill May 3, 2017 at 8:02 am

You can see a lot in the current trend in auto sales matched against consumer confidence.

Reality about to hit the road.

22 Bill May 3, 2017 at 8:21 am

Sorry about the duplicate. Here is more re autos:

23 Ted Craig May 3, 2017 at 9:06 am

You’re looking at the wrong auto sales, Bill. This actually supports the findings. New-car buyers are on average much wealthier than the average population. Used-car sales are much harder to measure, but the results from Ally, Kia and Sonic all point toward continued strength in that market.

24 Gerber Baby May 3, 2017 at 1:15 pm

Looks like random noise to me.

25 Amigo May 3, 2017 at 4:59 pm

An interesting aspect of many recent investor conference calls has been the dichotomy between a stated more optomistic outlook from customers, but at the same time a lack of follow-through on finalizing orders. Business attitudes are stated to have changed in many cases, however there has been little real change in willingness to spend. I’m unsure how to read this presently.

26 Benny Lava May 3, 2017 at 8:56 am

It is possible this is tied to confidence about the housing market rising. Or it could be mere trumpery. Only time will tell

27 Ted Craig May 3, 2017 at 9:03 am

One of the biggest drivers of consumer confidence is the jobs outlook. As you drive around town, pay attention to the numerous hiring signs at the fast food outlets. That’s not meant to be dismissive of the survey results. Just the opposite. Conditions really are better today for people without degrees than they were in 2015.

28 kevin May 3, 2017 at 11:23 am

Right but is “optimism” about now or the future? Based on your point, I’d think there’s more of a case to be optimistic in 2015–we had much more room to grow–then now. Its great that things are good now–but is there really any room for things to get better? I’m seeing ads for 1000$ bonuses to become an uber driver.

29 Hazel Meade May 3, 2017 at 9:42 am

The senile and feeble minded are enthusiastic about the Trump presidency. Time to cash out.

Also, I have noticed that some of my mutual funds have moved more investments into bonds, in spite of a rising market.
What’s that say?

30 derek May 3, 2017 at 10:00 am

How much of this is about education debt? Wasn’t there a vague hope that Democrats would write the whole thing off?

The future in environmental stewardship careers and various social engineering degrees doesn’t look good. I doubt there will be a massive redesign of all the bathrooms in the republic.

The wage pressures that the non college educated have already been exposed to is moving up the economic ladder, and there is a real possibility that large numbers of people with too much education, too much debt and not enough intelligence will be worse off.

Nothing maintains a sizeable chip on your shoulder than having education and the accompanied debt and doing menial jobs for low pay.

This is what happens when you build an economy where 10% of the workforce is globally competitive, 20% works for government, 20% service those 30% and the rest desperately try to make do. The shrinking of opportunity always starts at the bottom.

31 Troll Me May 3, 2017 at 10:07 am

10% globally competitive is high. Among other things, most places want somewhat different things than other places.

You don’t buy Bollywood films or haircuts from Zulu barbers, for example.

The monoculture that would ease global marketing has not yet arisen. Nor should it.

32 Gerber Baby May 3, 2017 at 12:48 pm

“Time to cash out. ”

If all the smart, rich people are race traitors like you, who actually believe the propoganda, you’d expect them to be cashing out. But they aren’t.

“Also, I have noticed that some of my mutual funds have moved more investments into bonds, in spite of a rising market. What’s that say?”

It’s an ancedote. There’s a thing called “data.” Look it up.

33 The Other Jim May 3, 2017 at 9:43 pm

>What’s that say?

Oh, I don’t know, Hazel.

Maybe it says that it’s been six months, are you still enraged that your tribe lost the what Hillary Clinton called “the most historic election of our lifetime”?

34 A Black Man May 3, 2017 at 10:12 am

Putting aside the silliness of “consumer confidence” as a metric, the accelerating devaluation of the college degree is probably what is showing up. The financialization of college, turning it into a bust out, has made the college diploma worth less each year. Outside of elite colleges, which have refused to abandon standards and expand class sizes, there has been the equivalent of massive counterfeiting in the diploma markets. Thirty years ago, a diploma from State U meant something. Now it just means you delayed adulthood for five years.

35 Moo cow May 3, 2017 at 10:40 am

And yet the 4 year college wage premium has never been higher.

36 Moo cow May 3, 2017 at 10:46 am

“I alone can fix it!”

Looks like the people who are responding positively are the same people who watch TV. A declining market.

“…Fox News is niche. And its niche is old white men. Cable news is a gerontocratic kingdom where Fox News serves as king. The median age of Americans watching CNN, MSNBC, and Fox News is over 60. Half of Fox News viewers are over the age of 68.

Television is particularly popular among men, people who didn’t go to college, and people over the age of 70, which is a great description of a predictable conservative. ”

37 Gerber Baby May 3, 2017 at 1:14 pm

“Television is particularly popular among men, people who didn’t go to college, and people over the age of 70, which is a great description of a predictable conservative”

If you’re wondering why you’re hearing that so much now, here’s a graph of the votes by education in 2012:

Not a high school graduate 64 35 1 3
High school graduate 51 48 1 21
Some college education 49 48 3 29
College graduate 47 51 2 29
Postgraduate education 55 42 3 18

Not that I’m complaining. Such rhetoric is great for keeping the WWC on the Trump train. Keep it up, race traitors!

38 mulp May 3, 2017 at 10:50 am

“Meanwhile, the expectations of Americans ages 55 and older have soared in the wake of the election to their highest level in more than fifteen years…”

Trump has promised zero cuts to Social Security and Medicare plus tax cuts, all great for the boomers. Especially the less educated who get higher benefits in proportion to incomes.

39 Slugger May 3, 2017 at 11:21 am

If “consumer confidence ” means willingness to spend money, then my confidence has certainly increased. My life expectancy is about ten-fifteen years at this point, and I don’t intend to leave much money unspent. Sometimes I worry that in my dotage I make foolish purchases, but then I remember that soon I will have all eternity to laugh about them.

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