Source of US Consumer Confidence: Increased Employment Rate

On CNBC today there are talks of the US Economy hitting a "Soft Patch" due to published statistics and analysis from the US Labor Bureau of the unemployment rate increasing to 9.1 percent. Several arguments arose as to whether the Fed should look into the possibility of a QE3, or in other words, the possibility of more cash printed and pushed into the secondary market. All in all, the government is wanting to arouse or increase the consumer confidence in order to nurture and strengthen the US economy.





US Unemplyment Rate
Provided by US Labor Bureau



  Although this may deem effective for the short-term, history has shown this to be ineffective. During QE1, big banks such as JP Morgan and Goldman Sachs held on to the cash provided by the government as excess reserves due to a complacent economic environment. The cash printed and given to the banks were meant to unfreeze the credit market so consumers can use the monetary funds as buying power to keep the economy afloat.
Although consumption of US goods is deemed necessary, it should be done through the proper causes of mediary channels. The main solution I believe in strenghening the US economy is by instilling a long-term perspective in creating more jobs and opportunities for consumers. Once this is done, consumer confidence will increase resulting in a multiplier effect of proper consumption and spending that are derived from consumer's discretionary income.

Although this theoretically sounds easy, it is very difficult to apply due to other external variables such as: increase in outsourced jobs for cheap labor, non-increase in wages or salaries to offset inflation, companies unwilling to spend to create jobs due to economic complacency and a substantial increase in US consumer and government debt due to stimulus packages from QE1 and QE2.

On a positive note; The Conference Board, a global, independent business membership and research association that works in the economic public interest of society, forecast the US economy's real GDP to increase throughout the third and fourth quarter. Which in some part may be due to the stimulus affects of QE2. However, they base their forecasts off the progression of technology and innovation.



Provided by the Conference Board

 Technology and innovation are great, but will they spur more job opportunities? Hopefully our choppy economy will turn out progressively smooth by the beginning of the third quarter and the issue of consumer confidence will diminish. In the end, it will all be based upon US employment rising to surge the economic growth which should be of more importance in both a short-term and long-term perspective.