- The Washington Times - Tuesday, September 29, 2009

NEW YORK — Americans’ worries about job security flared up in September, causing a widely watched barometer of consumer confidence to dip unexpectedly and raising more concern about the upcoming holiday shopping season and the overall economic recovery.

The New York-based Conference Board, a private research group, said that its Consumer Confidence Index dipped to 53.1 in September, down from the revised 54.5 reading in August. Economists surveyed by Thomson Reuters had expected a reading of 57.

The index had enjoyed a three-month climb fueled by signs that the economy might be stabilizing. That followed a historic low in February of 25.3 and a bumpy road after June as rising unemployment has caught up with shoppers.

A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

While the confidence index has doubled from the historic low in February, it’s still about half of the historic average and below the 61.4 level right before the collapse of Lehman Brothers last fall.

Paul Dales, U.S. economist at Capital Economics Ltd., said that despite a rally in the stock market, shoppers are fixating on the job market and declining wages.

“Falling employment and incomes are undermining confidence and are likely to continue to do so,” Mr. Dales wrote in a report released Tuesday. “Confidence is set to remain at fairly subdued levels,” he said, adding that, consequently, consumer spending will remain modest.

Mark Vitner, senior economist at Wells Fargo, noted that the unexpected decline in confidence raises concerns about holiday spending.

“Last year, consumers were shellshocked as they worried about what might happen to the economy. Today, shoppers … don’t have the means to step up spending,” Mr. Vitner said.

Economists watch consumer sentiment because spending on goods and services for consumers, including housing and health care, accounts for about 70 percent of U.S. economic activity by federal measures.

The stock market gave back early gains after the confidence report was released. At midday, the Dow Jones Industrial Average had fallen 37.56 points, or 0.4 percent, to 9,751.80.

Confidence, particularly its component measuring shoppers’ outlook, is considered a leading indicator and is a good barometer of spending levels over time, specifically for big-ticket items, according to Lynn Franco, director of the Conference Board Consumer Research Center.

The Conference Board’s Present Situation Index, which measures consumers’ current assessment of the economy, declined to 22.7 from 25.4. The Expectations Index, which measures consumers’ outlook over the next six months, dipped to 73.3 from 73.8 last month.

Recent economic data, from housing to manufacturing, has offered mixed signals but some evidence that an economic recovery might be slow.

According to a report issued Tuesday, the Standard & Poor’s/Case-Shiller home price index of 20 major cities rose 1.2 percent from June to a reading of 143.05. Though home prices are still 13.3 percent below July a year ago, the annual declines have slowed in all 20 cities for the sixth straight month.

But on Friday, the Commerce Department issued a disappointing housing report, noting that sales of new homes inched up only 0.7 percent last month, below economists’ expectations. Sales have risen 30 percent from the bottom in January, but they remain about 70 percent below their peak of four years ago.

The big concern for consumers is the job market. Economists surveyed by Thomson Reuters project that job losses slowed in September. On average, they predict 180,000 were lost this month, down from 216,000 in August. But Labor Department figures to be released Friday are projected to show unemployment ticking up to 9.8 percent in September from 9.7 percent in August. Mr. Vitner said that while the layoffs have slowed, hiring hasn’t picked up.

The weak job market, along with tight credit, has led shoppers to limit spending and focus on discounts when they do buy. Even those not worried about losing a job or finding a new one are embracing frugal behavior, buying only necessities and using more coupons.

Economists expect holiday sales to be, at best, flat from a year ago, the weakest holiday season since at least 1967, when the Commerce Department started collecting the data.

The consumer confidence survey, which was sent to 5,000 households and had a cutoff date of Sept. 22, showed lingering worries about the weak job market and overall business conditions.

Those claiming business conditions are “bad” increased to 46.3 percent from 44.6 percent, while those claiming conditions are “good” increased to 8.7 percent from 8.5 percent.

Consumers’ appraisal of the job market was also less optimistic. Those claiming jobs are “hard to get” increased to 47.0 percent from 44.3 percent, while those claiming jobs are “plentiful” decreased to 3.4 percent from 4.3 percent.

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