Tags: Consumer | Confidence | Seven-Month | Low | job | Fears

Consumer Confidence Hits Seven-Month Low on Job Fears

Tuesday, 28 Sep 2010 10:06 AM

Confidence among U.S. consumers fell in September to the lowest level in seven months as Americans became more pessimistic about the labor market.

The Conference Board’s confidence index declined to 48.5, lower than forecast, from 53.2 the prior month, figures from the New York-based private research group showed today. The median estimate of economists in a Bloomberg News survey was for a decline to 52.1.

An unemployment rate that’s forecast to exceed 9 percent through 2011 points to limited income gains, making it less likely Americans will boost their spending, which accounts for about 70 percent of the economy. The report underscores the view of Federal Reserve policy makers that the recovery is “likely to be modest” in coming months.

“It’s really all about the labor market,” Tom Porcelli, a senior economist at RBS Capital Markets Corp. in New York, said before the report. “We are now more than a year into recovery, yet we have not seen any meaningful job growth and the unemployment rate is likely to remain elevated for an extended period. There is an enormous amount of uncertainty.”

Estimates in the Bloomberg survey of 75 economists ranged from 48 to 55 for the September reading. The index averaged 53.7 during the recession that ended in June 2009.

The group’s measure of present conditions decreased to 23.1 in September, the lowest level in seven months, from 24.9. The share of consumers who said jobs are currently plentiful declined to 3.8 this month, the smallest this year. Those who said jobs are hard to get increased to 46.1 percent from 45.5 percent.

Decline in Expectations

The Conference Board’s gauge of expectations for the next six months dropped to 65.4, also the lowest since February, from 72.

The percent of respondents expecting more jobs to become available in the next six months dropped to 14.5 from 14.7 the previous month. The proportion who expect their incomes to rise over the next six months fell to 10.2, the lowest since February, from 10.6 percent.

The report showed confidence declined in seven of nine U.S. regions. Optimism in the East South Central region, which includes Alabama and Mississippi, plunged to the lowest level since February.

Another report earlier today showed housing prices in July posted their smallest year-over-year gain in four months. The S&P/Case Shiller 20-city index rose 3.2 percent in July from a year earlier. The gauge fell 0.1 percent from June on a seasonally adjusted basis.

Unemployment Forecast

With unemployment forecast to stay close to 10 percent and Americans less inclined to take on more debt, consumer spending will probably be slow to strengthen.

Economists surveyed by Bloomberg in the first week of September forecast consumer spending will grow at a 2 percent average pace in the second half of the year, matching the first half.

The world’s largest economy expanded at a 1.6 percent pace in the second quarter, slower than the 3.7 percent annual rate posted in the first three months of the year. Economists surveyed this month forecast growth will average 2.1 percent from July through December.

“The pace of recovery in output and employment has slowed in recent months,” Fed policy makers said in their statement last week after meeting on interest rates. “Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.”

Bed Bath & Beyond

Bed Bath & Beyond Inc. is “cautiously optimistic” about the second half, Steven Temares, the home-furnishings retailer’s chief executive officer, said on a Sept. 22 conference call with analysts. The labor market continues “to pressure consumers and affect their spending,” he said.

Employers have been reluctant to hire without faster gains in demand. Companies created 71,500 jobs on average from May through August, compared with 119,250 in the previous four month, according to Labor Department data.

Faster job growth is needed to help reduce unemployment. The jobless rate, which reached a 26-year high of 10.1 percent in October 2009, will average 9.6 percent in the second half of this year and 9.2 percent in 2011, according to a Bloomberg survey earlier this month.

The economy is a top issue for voters in the November congressional elections, and polls show the public is increasingly skeptical of President Barack Obama’s performance. A poll by Quinnipiac University taken Aug. 31 to Sept. 7 showed 56 percent of voters disapproved of Obama’s handling of the economy.

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Confidence among U.S. consumers fell in September to the lowest level in seven months as Americans became more pessimistic about the labor market.The Conference Board s confidence index declined to 48.5, lower than forecast, from 53.2 the prior month, figures from the New...
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2010-06-28
 

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