Something Doesn’t Add Up

On the one hand :

Consumers expect better economic growth and rising incomes in the coming months, pushing a measure of confidence to a seven-year high in October. The University of Michigan said Friday that its index of consumer sentiment rose to 86.9 from 84.6 in September. That’s the highest since July 2007, five months before the Great Recession began. Still, the index regularly topped 90 before the downturn.

The solid increase suggests consumers largely dismissed concerns about slowing global growth and have ignored the sharp swings in financial markets earlier this month. Instead, greater hiring and lower gas prices are boosting their outlook.

“Market volatility, geopolitical tensions, and worries about the global economy weren’t able to sour consumers’ moods this month,” said Greg Daco, an economist at Oxford Economics.

Richard Curtin, the survey’s chief economist, says that almost six in ten of the respondents said the economy has improved recently, the highest proportion in more than 10 years.

(source)

… and:

It appears the burden of hope for the future of the American consumer, based on this morning’s confidence survey data, is based on a surge in incomes. In fact, the income ‘hope’ index is at its highest since February 2008, which is odd given the utter stagnation of real wages. Perhaps the survey respondents have been listening to a little too much ‘hope-and-change’ TV promises of minimum wage hikes and fair livable wages and not enough paying attention to the layoffs, “M&A synergies”, restructurings, and buybacks firms are actually undertaking, or as some call it, reality. Shown on the chart below: the largest decoupling between reality and hope in the history of income reality vs expectations.

(source)

On the other:

Voters are deeply frustrated with the economy as they head to the polls Tuesday for a midterm election Republicans hope will yield them control of the Senate.

While the unemployment rate is dropping, the economy is expanding and gas prices are below $3 per gallon, polls show that most voters feel the recovery has passed them by. “We find that most people say they’re falling behind or at best staying even,” said Alec Tyson, a senior researcher at the Pew Research Center. “Even as the overall employment picture may be improving, people aren’t feeling it in their own wages and day-to-day lives.”

While Obama has increasingly tried to trumpet positive news about the economy, polling shows the message hasn’t resonated with voters.

That’s party because wages aren’t outpacing inflation, according to Josh Bivens, research and policy director at the Economic Policy Institute.

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Angst about the economy has clearly helped tilt Tuesday’s election in the GOP’s favor.

(source)