Rising costs, reduced mobility, and policy uncertainty may explain why households feel squeezed even when headline growth is good.

January saw Americans grow markedly more pessimistic about the economy. The Conference Board reported that its Consumer Confidence Index fell almost ten points in one month, reaching its lowest level since 2014. Consumers reported worsening views of current market conditions, as well as a sharp reduction in expectations regarding job prospects and income for the upcoming months.

Upon initial review, this pessimism appears hard to square with recent headlines. Employers seem to be adding jobs; measured output has not fallen; consumers in the aggregate are still spending more in nominal terms than they were last year. This has led commentators to label this drop in confidence merely a perception problem.

Market participants, however, do not react to abstract aggregates. They are responding to what they are directly experiencing: rising prices, tighter budgets, and uncertainty about future opportunities and job prospects. This is not the result of some vague uneasiness. Rather, it captures concrete concerns that broad economic averages often smooth over.

Yes, the index regarding current conditions fell, and fell sharply. According to the Conference Board, the share of respondents who said jobs are “plentiful” fell to 23.9 percent, while the share saying jobs are “hard to get” rose to 20.8 percent. These data do not come from individuals attempting to judge macroeconomic trends. Rather, they were evaluations of lived labor-market constraints. Even if employment totals remain positive in the aggregate, such a tallying cannot capture changes in perceived difficulty in finding or changing jobs. People do not consult nationwide aggregates when considering whether it is easy or difficult to find jobs. Almost no one searches for “a US job,” but for specific jobs in specific locations requiring specific skill sets.

...read more at thedailyeconomy.org