- The Washington Times - Wednesday, November 28, 2001

Confidence this month slipped further to the lowest level in 7 1/2 years as consumers found jobs increasingly hard to get, the Conference Board reported yesterday.
The slide in confidence has not ended the American dream of owning a home, however. The National Association of Realtors reported that the lure of low mortgage rates overrode job worries for some consumers, sparking a 5.5 percent boost in existing-home sales last month. The rate of homeownership reached a record 67 percent in the past decade.
Still, the housing sales gain retraced only part of a 12 percent drop seen after the September 11 terrorist attacks, and suggests that the once-booming housing market is unlikely to regain the luster of record sales rates set earlier this year.
Economists say the deteriorating job outlook will continue to drag down consumer confidence and take a toll on the housing market and the economy in the months ahead. Nearly four out of five consumers surveyed by the Conference Board said they found jobs were no longer plentiful or they were downright hard to get.
"Confidence will be an important factor" determining the fate of the economy, said Michael Moskow, president of the Chicago Federal Reserve bank, in a speech yesterday. He expects conditions to remain sluggish and, while a recovery should come next year, the timing is uncertain.
Laurence Meyer, a Fed governor known for his outspoken views, said the central bank should take aggressive action to promote a recovery, driving interest rates below the 2.5 percent inflation rate if necessary.
Mr. Meyer, who plans to retire when his term expires next year, cast aside the usual decorum that prevents Fed governors from publicly airing political views. He called on Congress to pass an economic-stimulus bill by the end of the year, asserting that the delay in passing legislation is making the Fed's job more difficult.
The decline to 82.2 from 85.3 in the New York business research group's confidence index contrasts with a small uptick in the November consumer-sentiment index published by the University of Michigan last week. The university survey puts less emphasis on jobs than the Conference Board report, while giving greater weight to positive factors such as improving inflation, interest rates and stock performance.
The university's survey stoked hopes for a quick recovery in the financial markets last week. But some of those gains were wiped out by yesterday's report, which sent the Dow Jones Industrial Average down by 110 points. Economists say that jobs usually are the overriding concern of consumers during a recession.
"The message from today's report shows that workers are becoming further discouraged about job prospects," said David Orr, chief economist of Wachovia Securities. "Current financial market psychology is underestimating the negative impact that rising joblessness will have on the housing and motor vehicle markets in the first half of 2002."
The Conference Board survey showed a small increase in expectations that the economy will improve six months down the road. That increase probably reflects optimism inspired by recent gains in the stock market, a string of successes in the war in Afghanistan and the absence of any further terrorist attacks, Mr. Orr said.
"After the terrorist attacks, confidence has become the buzzword in charting the future course of the economy," said Sung Won Sohn, chief economic officer of Wells Fargo & Co.
Consumers reacted sharply to the terrorist attacks, curtailing their air travel and suspending spending on luxuries and other items. But Mr. Sohn said they eventually will adjust and learn to live with the possibility of future terrorist attacks, just as consumers in Britain and Israel have done for years.

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