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Consumer Confidence Hits 18-Year High

Sigma Investment Counselors

November 2, 2018

The U.S. consumer confidence index rose in October to an 18-year high, amid optimism about jobs and the economy, according to the New York-based Conference Board.

It is also probable that improving consumer confidence may be, at least in part, attributable to broad gains in wages.  Specific wage gain calculations are complex and single data points do not tell the whole story.  Consider the following:

According to the latest edition of the “Glassdoor Local Pay Reports,” U.S. median wages increased 2.4% to $52,746 per year.

On November 1, 2018, Amazon implemented a previously announced increase in its minimum wage to $15 per hour for all employees, including temporary, part-time and seasonal.  While it is impossible to be specific, this probably amounts to an increase of more than 10%, or $3,000 to $4,000 per year, for lower pay level employees, assuming a 2,000 hour work year (50 weeks times 8 hours per day).

Nationally, percentage wage increases may be focused on the bottom of the pay scale range, in part due to the lower level of base pay and in part due to multiple increases in state and local minimum wages, even though the national minimum is still only $7.25 per hour.

Wage gains also vary significantly between job descriptions, reflecting supply and demand dynamics.

Broadly based wage gain calculations are further complicated by the tendency for new hires, and/or newly promoted employees, to receive materially lower wages than the retiring employee they replace.

Investors might want to note that retailers are almost universally going into the Christmas season with a very high level of confidence.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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