Americans' dour economic mood in the face of the high inflation rate may be beginning to thaw, the April IBD/TIPP Poll finds.
The IBD/TIPP Economic Optimism Index, an early monthly read on consumer confidence, jumped 4.5 points to 45.5, bouncing from March's eight-year low to the highest level of 2022. Still, pessimism maintained its grip for an eighth straight month. Readings above the neutral 50 level reflect optimism.
While economic confidence may have bottomed in March, as gas prices spiked following Russia's invasion of Ukraine, the news still isn't great. Household financial stress hit the highest level since April 2020, at the outset of the pandemic.
U.S. Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term prospects for the U.S. economy and personal finances, along with support for government economic policies.
The six-month outlook for the U.S. economy and for personal finances both saw solid rebounds after crashing to the lowest levels since August 2011. That was back when the country was still climbing out of the financial crisis, and a battle over fiscal policy between the House GOP and President Obama nearly led to a default on U.S. debt.
In April, the six-month U.S. economic outlook index jumped 5.8 points to 39.7. But that's still a big comedown from the Covid-era high of 55.9 in April 2021.
The personal finances subindex recovered 4.9 points to 52.2, after slipping into pessimistic territory in March for the first time in 21 months. Views of personal finances had reached a bullish 59.7 last July.
The gauge of support for federal economic policies climbed 2.6 points to 44.5. That gauge got as high as 56.4 last June, after more rounds of stimulus checks and amid a big push for more expansive policies from President Biden.
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High Inflation Rate Shrinks Wages
The still-glum near-term outlook seems at odds with the March jobs report, delivered on April 1, which showed the U.S. economy added 431,000 jobs for the month as the unemployment rate slid 3.6%. Meanwhile, the average hourly wage rose a strong 5.6% from a year ago.
The problem, however, is that the rise in consumer prices is eating away all those wage gains, and then some, for most Americans. The consumer price index rose 8.5% from a year ago in March, the biggest increase in 40 years.
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The IBD/TIPP Poll finds that just 20% of adults say their wages have kept pace with inflation, while 48% say they haven't kept pace.
The IBD/TIPP financial-related stress index increased 1.5 points to 67.9. Higher numbers reflect rising stress.
Despite apparent labor market tightness, the IBD/TIPP Poll finds that 41% of households have at least one member who is out of work and looking for employment, down 1 point from March. Now 32% are concerned about job loss in the household, down 2 points. Factoring in the overlap, the share of job-sensitive households is currently 52%, down 1 point from last month.
Investors Grow More Bearish On U.S. Economy
Investors' economic views perked up in April, despite the stock market's rough start to the year amid rising interest and inflation rates and Russia-related risk.
The U.S. Economic Optimism gauge bounced 5.4 points to 52 among self-described investors, after hitting the lowest level since September 2016. IBD/TIPP counts as investors those respondents who say they have at least $10,000 in household-owned mutual funds or equities.
Although the S&P 500 remains above lows hit amid the Feb. 24 invasion of Ukraine, the recent market rally has given way to renewed selling pressure.
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Investors remain far more upbeat than noninvestors. Among noninvestors, the IBD/TIPP index rose 3.9 points to 41.7, still solidly pessimistic.
The April IBD/TIPP Poll reflects online surveys of 1,305 adults from April 6-8. The results come with a credibility interval of +/- 2.8 points.
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.
