Consumer confidence edges down in October amid job worries
Tuesday, October 31st 2006, 10:58 am
By: News On 6
NEW YORK (AP) _ Consumers' confidence in the economy weakened a bit in October, as job worries offset the benefits from falling gasoline prices, a New York-based private research group said Tuesday.
The Conference Board said that its consumer confidence index edged down to 105.4, from a revised 105.9 in September. Analysts had expected a reading of 107.8.
``October's dip in confidence was prompted by consumers' mixed assessment of present-day business conditions and a less favorable view of the job market,'' said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. ``Consumers' short-term expectations posted a slight improvement, but the outlook for the labor market remains mixed.''
Worries about the job market began to crop up in the consumer confidence reports in August and September, when the indexes dropped and rose, respectively.
Franco said October's readings hinted at moderate economic growth for the rest of the year and into the first few months of 2007.
Despite the concerns about jobs growth, wages and benefits paid to American workers rose in the July-September period at the fastest pace in more than two years, led by a big jump in the cost of employee benefits such as health insurance and pensions.
The Labor Department reported that its Employment Cost Index was up 1 percent in the third quarter, compared to a 0.9 percent rise in the April-June period. It was the biggest quarterly increase since a similar 1 percent rise in the second quarter of 2004.
The Federal Reserve held interest rates steady again last week, but Fed policy makers are watching to ensure that wage-driven inflation does not increase. Higher wages would give people more money to spend, but could also boost prices for what they buy.
The stock market gave up some of its early gains Tuesday after the Conference Board's report came out. Better-than-expected quarterly reports from companies like Eastman Kodak Co. drew the market's attention away from the economic data.
In midmorning trading, the Dow Jones industrial average fell 16.33, or 0.14 percent, to 12,070.17.
The private research group's Present Situation Index, which measures how shoppers feel now about economic conditions, fell to 124.7 from 128.3. The Expectations Index, which measures consumers' outlook over the next six months, rose to 92.6 from 91.0.
The consumer confidence report could prove to be a letdown for retailers before the holiday shopping season. Consumers proved resilient even when energy prices were rising earlier in the year. More recently, falling gasoline prices have helped offset the overall slowing of the economy. After topping $3 a gallon in early August, prices for regular gasoline are now hovering around $2.22 a gallon, according to the Energy Department.
``Gas prices influence your pocketbook immediately,'' said Chris Donnelly, partner of Accenture's retail practice.
But consumers' willingness to spend depends largely on job security. While the job market has been steady, recent monthly reports from the Labor Department have showed slower growth. Employers added just 51,000 jobs in September, the fewest in almost a year, while the unemployment rate dropped down to 4.6 percent, offering a mixed assessment of the nation's job environment. On Friday, analysts expect the government to report a gain of 125,000 jobs and an unemployment rate of 4.6 percent.
The consumer confidence report _ derived from responses through Oct. 24 to a survey mailed to 5,000 households in a consumer research panel _ showed that labor market conditions were less positive than in September. Consumers saying jobs are ``plentiful'' declined to 25.8 percent from 26.2 percent. Those claiming jobs are ``hard to get'' increased to 22.0 percent from 20.9 percent in September.
The outlook for the labor market, however, was mixed. Those expecting more jobs to become available in the coming months edged up to 15.2 percent from 14.7 percent, while those anticipating fewer jobs also increased to 17.5 percent from 16.5 percent. The proportion of consumers expecting their incomes to increase in the months ahead edged down to 19.6 percent from 20.2 percent in September.