Continued job worries resulted in an unexpected decline in consumer confidence in September, the second straight monthly dip, a private New York research group said Tuesday.
The Consumer Confidence Index fell to 96.8 from a revised reading of 98.7 in August, according to the Conference Board. Analysts had expected a reading of 99.5.
"Soft labor market conditions have clearly taken a toll on consumer confidence," said Lynn Franco, director of the organization's Consumer Research Center. "Still, expectations for the next six months are virtually unchanged from August."
Economists closely track consumers' outlook about the economy and employment because consumer spending accounts for two-thirds of U.S. economic activity.
The confidence index, which was as high as 144.7 in May 2000 when the job market was flourishing, has been volatile since the economy emerged from recession in November 2001. It fell to 64.4 in March 2003 after the U.S.-led invasion of Iraq but then began what had been a gradual but inconsistent rise as the job market recovery has remained tenuous, Franco said. It was 105.7 in July.
The Present Situation Index, one component of the consumer confidence reading, fell to 95.5 from 100.7 in August. The Expectations Index, which measures consumers' outlook over the next six months, edged up to 97.6 from 97.3 last month.
The Conference Board's indexes are derived from responses received through Sept. 20 to a survey mailed to 5,000 households in a consumer research panel. The figures released Tuesday include responses from at least 2,500 households. The figures for August were revised after all the surveys for that month were tabulated.
The period coincided with the volatile rise of oil prices, which topped the psychological milestone of $50 per barrel Tuesday, and the recent hurricanes that devastated Florida. The hurricanes did not affect the confidence numbers, but could erode consumer sentiment later as the economic effect is digested in the region, Franco said.
And while rising oil prices do not directly hurt consumer confidence, it erodes corporate profits, which makes business become more conservative in hiring, said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, N.C.
Still, while Vitner said the consumer confidence readings in September were "disappointing, they were not that weak." He said the main index is close to a reading of 100, which is the benchmark for "normal economic times."
"It's not that things are bad. They're just not great," Vitner said. "We're in an in-between mode."
Vitner and other economists are awaiting September job figures from the Labor Department, due Oct. 8. Analysts are expecting the nation's nonfarm payrolls to grow by 153,000. Job growth slowed dramatically in July _ 32,000 jobs were added _ but rebounded in August, when the economy added 144,000 jobs.
Historically, consumers' outlook on jobs is a good barometer of future consumer spending, said Sung Won Sohn, economist at Wells Fargo & Co. That's good news since the survey showed that participants anticipating more jobs to become available in the next six months rose to 17.7 percent from 16.3 percent. And the proportion of consumers expecting their incomes to improve in the months ahead edged up to 20 percent from 19.7 percent last month. Those expecting fewer jobs increased to 16.1 percent from 15.1 percent.
Consumers' assessment of present-day conditions was mixed. Those saying business conditions are "good" edged up to 23.6 percent from 23 percent. Those claiming conditions are "bad" remained flat at 20.3 percent, compared to 20.2 percent last month. The job situation was less favorable than in August. Consumers saying jobs are "plentiful" declined to 16.8 percent from 18.4 percent. Those claiming jobs are "hard to get" rose to 28.3 percent from 26.0 percent in August.
WHAT IS CONSUMER CONFIDENCE?
It's the degree of optimism consumers express for the economy, as shown by their saving and spending. The consumer confidence index is adjusted monthly based on surveys of about 5,000 households.