Consumer Comfort Steadies After Four-Week Fall: EconomyShobhana Chandra
Confidence among American consumers stabilized last week after four straight declines even as their views of the economy deteriorated.
The Bloomberg Consumer Comfort Index rose to minus 32.1 in the week ended Sept. 8 from minus 32.3. The drop was within the survey’s margin of error of 3 percentage points. A measure of households’ assessment of the economy fell to the lowest level since mid-May.
The smallest back-to-back payroll gains in a year and rising mortgage interest rates are weighing on consumers’ moods. The restrained pace of hiring makes it harder to spur growth in the second half of 2013, at the same time that gains in stock and home prices help mend household balance sheets.
“Consumer confidence is going to be in a holding pattern for some time,” said Scott Brown, chief economist for Raymond James & Associates Inc. in St. Petersburg, Florida. “On the economy, it’s just more of the same. We’re not seeing a whole lot of wage increases.”
Another report today showed jobless claims plunged last week to the lowest level since April 2006 as work on computer systems in California and Nevada caused those state employment agencies to report fewer filings.
First-time claims for unemployment insurance fell by 31,000 to 292,000 in the week ended Sept. 7, which also included the Labor Day holiday, according to Labor Department data. The median forecast in a Bloomberg survey called for 330,000 applications.
California switched to a new system over the Labor Day weekend, which slowed the processing of applications, said Kevin Callori, the state’s Employment Development Department spokesman. Nevada was replacing its 30-year-old unemployment insurance system with a new computer interface that came online Sept. 4, said Kelly Karch at the state’s Department of Employment, Training and Rehabilitation.
The decrease in filings doesn’t signal a change in job-market conditions because most of it was caused by computer-network conversions in the two states, according to a Labor Department spokesman.
Stocks fell, halting a seven-day rally for the Standard & Poor’s 500 Index. The S&P 500 dropped 0.3 percent to 1,683.42 at the close of trading in New York.
Two of the three components of the Bloomberg comfort index worsened last week. The gauge assessing Americans’ views on the current state of the economy fell to minus 55.5, the lowest since the week ended May 12, from minus 55.3. The measure of consumers’ views on their personal finances dropped to minus 1.9, from minus 1.1 the prior week.
“Consumers have adopted a wait-and-see attitude,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Americans remain unimpressed with the pace of job creation and wage gains. They’re waiting for the long-promised acceleration in second-half growth.”
The index of the buying climate rose to minus 38.9 from minus 40.6, the report showed. The figure may reflect gasoline prices that have declined this month. The average price of a gallon of gas was $3.55 yesterday, down from $3.59 at the end of August, according to figures from AAA, the largest U.S. motoring association.
Vehicle sales have been a bright spot for the economy. Cars and light trucks sold in August at the fastest annualized rate since November 2007, according to data from Ward’s Automotive Group. Results at General Motors Co., Ford Motor Co., and Toyota Motor Corp. exceeded analysts’ estimates.
Even with the gains in sales, executives at automakers are watching the signals from the labor market and other parts of the economy to gauge future demand.
Recent “job growth is consistent with lackluster gains and after-tax incomes which are running at less than 1 percent year-over-year growth during the January-to-July period,” Ellen Hughes-Cromwick, chief economist at Dearborn, Michigan-based Ford, said on a Sept. 4 conference call. “As an offset, low borrowing costs and rising consumer wealth should continue to support spending growth going forward.”
Payrolls expanded by 169,000 workers last month after rising 104,000 in July, Labor Department data showed on Sept. 6. The jobless rate dropped to 7.3 percent in August, the lowest since December 2008, as workers left the labor force.
Job openings fell in July to the lowest level in six months, figures showed this week.
At the same time, the recovery in the housing market has driven up home values, which together with advances in equity prices are boosting household wealth and helping to sustain the consumer purchases that account for about 70 percent of the economy.
Federal Reserve officials, who meet Sept. 17-18, are debating whether the job market has improved enough to warrant trimming $85 billion in monthly bond purchases.
The comfort index among the lowest income earners, or those making less than $15,000 a year, dropped to minus 69.7 last week, the weakest reading this year. For Americans at the top end, who earn more than $100,000 annually, confidence fell to a three-month low of 8.9.