The confidence of California consumers in the economy has increased somewhat, as businesses in portions of the state reopened in the wake of the pandemic. Yet, uncertainty as to the future trajectory of Covid-19 and the availability and timing of a vaccine is the wild card moving forward. 

According to a recent survey of Californians, consumer confidence rose 5%, the first gain since the onset of the pandemic. This is promising news given that consumer confidence drives buying power and consumption accounts, on average, for 70% of all U.S. economic activity. 

The California Consumer Index, released in October by Claremont McKenna College’s Lowe Institute of Political Economy and Chapman University, indicates that the uptick in consumers’ confidence in the third quarter follows in the wake of the devastating lack of confidence evidenced since year end 2019,  through the current pandemic, to the present.

“The increase in consumer sentiment is good news and is felt in most demographic groups of Californians,” said Cameron Shelton, Director of the Lowe Institute of Political Economy.

Although the survey found a decline in household income across the board, confidence in the economy rose among most income categories. Those earning more than $100,000 annually experienced an average loss of 15 % of income, yet confidence increased by 5%.  Those earning less than $50,000 bore larger relative losses of income – 34 %; however, confidence rose by 2%.  

Large increases in sentiment among specific groups of consumers are important, positive indicators during this time of economic distress. Rebounds in sentiment among the self-employed, rising 36%, and part-time workers, increasing by 8 %, indicate some movement in the job market. Further, consumer confidence among those in the middle-income range, from $50 K – $100 K, rose 3 %.  “These results seem to track the return of work as partial reopening was allowed and businesses discovered new ways to reach customers,” said Shelton.

Consumer sentiment rose 8 % among respondents 18-24 years old – those most likely to have been laid off or furloughed as a result of the shut-down – partially reversing the large downward collapse in confidence of this age group. And, the confidence of senior citizens increased by 13%. 

The 2,000-person survey asked Californians several questions about future economic and financial conditions. When queried about their perceived financial situation next year, confidence shot up by 9 %. 

When asked to assess U.S. business conditions next year, there was a positive increase -13 % – in confidence.  Respondents also had a more positive outlook as to the effect of business conditions on their household this year and next. 

The bad news. Californians surveyed continue to be concerned about the labor market, with overall sentiment regarding employment up a mere 0.4% between the second and third quarters of this year.  A recent U.S. Labor Department report indicates fewer people applying for first-time unemployment benefits compared to a week ago.  However, according to a Los Angeles Times story, “The most recent figure is still more than three times the average in recent weeks prior to the coronavirus outbreak and lockdowns in March, reflecting continued large-scale layoffs and distress in the labor market.”

Will the confidence of California consumers in the economy continue to edge upward?  Or is this a blip? With job growth slowing down, when will there be a return to full employment? And, what are the prospects of advancing economic growth moving forward?  Questions with no easy answers, given that the tragic impact of the virus on people’s lives continues, with hope for a vaccine and economic recovery yet unfulfilled.  

However, there are some bright signs. According to a recent, national  survey conducted by McKinsey & Company, “Even though 80 % of consumers report still feeling somewhat unsafe, out-of-home activity is picking up with one-third of consumers resuming “normal” out-of-home activities with Americans most eager to return to indoor dining and gatherings with family and friends.”

Yet, uncertainty reigns. In the words of business leader Mindy Grossman, “There are three things that are never good for a consumer mindset:  uncertainty certainly, concern and discordance.”  Not sure I’m going to sleep well tonight.


Billie Greer, among other activities, is a Trustee of the Lowe Institute of Political Economy at Claremont McKenna College.  She regularly reports on the Consumer Sentiment Index which is released quarterly.