LITTLE ROCK — Confidence among U.S. consumers unexpectedly fell in September as a rising unemployment rate weighed on households, according to a report released Tuesday.
The confidence index produced by the Conference Board, a private research group, dropped to 53.1, from a revised 54.5 in August, a report from the New York-based group showed. Measures of present conditions and expectations for six months from now both declined.
Unemployment is forecast to rise to 10 percent this year even as themonthly pace of job losses slows. Tuesday's report corroborates the Federal Reserve's assessment last week that sluggish income growth and tight credit are restraining household spending and slowing the pace of the economic recovery.
"Layoffs appear to have topped out, but hiring has not yet begun," John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, N.C., said before the report. "Consumer confidence and spending will likely remain constrained well into early 2010."
Economists watch consumer sentiment because spending on goods and services for consumers accounts for about 70 percent of U.S. economic activity by federal measures. While the reading doesn't always predict shortterm spending, it does serve as a barometer of spending levels over time, specificallyfor big-ticket items.
Consumer confidence had been projected to increase to 57 this month from an originally reported reading of 54.1 in August, according to the median estimate in a Bloomberg News survey of 78 economists. Forecasts ranged from 54 to 70. The index averaged 58 last year.
A reading above 90 meansthe economy is on solid footing. Above 100 signals strong growth.
The report came after rosier data on housing, also released Tuesday, that showed home prices in 20 major U.S. cities rose for the third month in a row in July. But investors fixated on the confidence report, and the Dow Jones industrials fell 47.16, or 0.5 percent, to 9,742.20.
The consumer confidence survey, which was sent to 5,000 households and had a cutoff date of Sept. 22, showed lingering worries about overall business conditions. The Conference Board found that the share of consumers who said jobs are plentiful fell to 3.4 percent from 4.3 percent. The proportion of peoplewho said jobs are hard to get increased to 47 percent from 44.3 percent.
The proportion of people who expect their incomes to rise over the next six months increased to 11.2 percent from 10.8 percent, but the share expecting more jobs decreased to 17.9 percent from 18 percent.
Plans to buy automobiles, homes and major appliances within the next six months declined in September, the report showed.
The report confirmed that "the consumer sector will not be much of a driver of the recovery beyond the third quarter, when auto sales spiked in response to the temporary 'cash for clunkers' program," said Brian Bethune, IHS Global Insight's chief U.S. financial economist.
The index, which hit a historic low of 25.3 in February, had enjoyed a three-month climb from March through May thanks to signs that the economy might be stabilizing. The road has been bumpier since June as rising unemployment has caught up with shoppers. Many economists expect confidence to be stuck at the current levels during the critical Christmas shopping season.
While the confidence index has doubled from the February low, it's still about half of the historic average and below the 61.4 level right before the collapse of Lehman Brothers last fall.
"Last year, consumers were shellshocked as they worried about what might happen to the economy," said Mark Vitner, senior economist at Wells Fargo. "Today, shoppers ... don't have the means to step up spending."
Tuesday's figures follow the Reuters/University of Michigan index of consumer sentiment, which rose this month to the highest level since January 2008.
Economists say the Conference Board's index tends to bemore influenced by attitudes about the labor market.
The pace of job losses is easing as the economy shows signs of accelerating. Payrolls fell by 216,000 in August, the smallest decline in a year, according to the Labor Department.
The economy has lost 6.9 million jobs since the recession began in December 2007, making it the biggest employment slump of any downturn in the post-World War II period. Economists surveyed byBloomberg predict unemployment may reach 10 percent by year-end, the highest level since 1983 and up from 9.7 percent in August.
In Arkansas, according to the U.S. Bureau of Labor Statistics, August unemployment was 7.1 percent, down from 7.4 percent in July.
Information for this article was contributed by Shobhana Chandra and Carol Wolf of Bloomberg News and by Anne D'Innocenzio and Ashley M. Heher of The Associated Press.
Front Section, Pages 1, 7 on 09/30/2009