Economic sentiment increased slightly over the last two weeks after falling for the first time in 2024 in the last report. The Penta-CivicScience Economic Sentiment Index (ESI) increased 0.3 points over the last two weeks to 37.1.
Two of the ESI’s five indicators increased over the past two weeks. Confidence in buying a new home rose the most, increasing 2.0 points to 23.0.
—Confidence in making a major purchase rose 1.6 points to 27.1. This indicator, which also increased last period, has firmly recovered from its low point in October 2023 and is again at its highest point in over a year.
—Confidence in personal finances fell 0.3 points to 56.4.
—Confidence in the overall U.S. economy fell 0.5 points to 39.6.
—Confidence in finding a new job fell 1.4 points to 39.1.
The January 2024 jobs report showed that nonfarm payroll employment increased by 353,000 in January, while the unemployment rate stayed constant at 3.7 percent for the third consecutive month. This increase in employment can be attributed to higherings across industries. CNN reported that this gain “blew economists’ expectations out of the water,” with most forecasts predicting a gain of 176,500 jobs in January.
This stunning jobs report is believed to have cemented the Federal Reserves’ anticipated decision to refrain from cutting interest rates in March. In an appearance on 60 Minutes, Fed Chair Jerome Powell stated that rate cuts are “unlikely” to occur in March and expressed that the Fed needs to feel “more confident” that inflation is reducing before cuts occur.
These prospects of an early cut almost diminished following the release of the January consumer price index (CPI), which increased by 0.3 percent from December. This amounts to a 3.1% increase in the all items index over the past year, down from 3.4% in December.
Despite the stock market’s slight lull following Powell’s comments, the S&P continued to barrel past previous record highs, with the index closing above 5,000 for the first time on February 9.
Mortgage rates also reacted to the jobs report. The average 30-year fixed mortgage rate increased above 7% following the release of the report as the housing market reacted to the decreased likelihood that the Fed will cut the federal funds rate.
The ESI’s three-day moving average began this two-week stretch at 34.6 on January 31. It then increased to 37.8 on February 3 before trending downward to 36.0 on February 7. The three-day moving average then increased to its highest point of 38.7 on February 11 before decreasing to 37.5 to close out the session on February 13.
The next release of the ESI will be Wednesday, February 28, 2024.