Posted on: Saturday, September 27, 2003

Slow job market weighs on consumer confidence

Bloomberg News Service

U.S. consumer sentiment fell in September for a second month as concerns about jobs weighed on Americans, a University of Michigan survey shows.

The university's September consumer sentiment index fell to 87.7 from 89.3 in August, people with access to the report said. That was down from a preliminary reading of 88.2 reported on Sept. 12.

Confidence, which surged after the end of major conflict in Iraq, has ebbed since July. That's in part because the economic expansion and a stock market recovery have failed to lead to job creation, economists said. The economy lost 93,000 jobs in August and is forecast to have shed more this month.

"Americans are still not convinced that this expansion can be sustained. They don't see job growth," said Daniel Laufenberg, chief economist at American Express Financial Corp. in Minneapolis. "Nevertheless, the drop wasn't large enough to suggest that consumers will change their behavior" and rein in spending.

The survey's sample size is relatively small, and Fed studies have shown confidence indicators don't always predict changes in spending patterns. Still, investors and economists follow its movements because of its long track record. The University of Michigan began surveying consumer sentiment in 1946.

While the stock markets have risen and business have showed signs of productivity gains, the labor market has remained sluggish, said Richard DeKaser, an economist at National City Corp. in Cleveland. "The single most important factor in determining consumer spending is after-tax income."

Jobless claims fell below 400,000 for the first time in a month last week partly because Hurricane Isabel prevented some people on the East Coast from filing claims. The four-week average, a less volatile measure, fell to 407,000 from 411,000. Some economists consider 400,000 to be the dividing line between job expansion and contraction.