Job worries push closely watched measure of sentiment lower in March, though it is above forecasts.
March 30, 2004: 11:34 AM EST
By Mark Gongloff, CNN/Money staff writer
NEW YORK (CNN/Money) - Worries about the job market pushed consumer confidence to its lowest level in five months in March, a research group said Tuesday -- although its index came in above Wall Street forecasts.
The Conference Board, a business research group based in New York, said its closely watched index of consumer confidence edged down to 88.3 this month -- the lowest reading since last October -- from a revised 88.5 in February.
The survey's index measuring consumers' expectations for the future fell to 91 from a downwardly revised 91.9 in February, the lowest since September, but the "present situation" index rose to 84.1 from a revised 83.3.
"While consumers claimed business conditions were more favorable in March than last month, they also claimed jobs were less readily available," Lynn Franco, director of the firm's Consumer Research Center, said in a release. "The labor market not only continues to dampen consumers' present-day spirits, but it is also making them less optimistic about the short-term outlook."
Economists had expected the confidence index, based on a survey of 5,000 households, to fall to 86 from the 87.3 originally reported for February, according to Briefing.com.
"It came in a little higher than expected, but I take it as more of the same -- consumers are hanging in, but they're not showing robust enthusiasm," said former Fed economist Wayne Ayers, now chief economist at Fleet Boston Financial.
On Wall Street, the report had little effect on stocks, which were mixed in mid-morning trading. Treasury bond prices edged higher.
Confidence is watched closely by policy makers and analysts, since consumer spending fuels more than two-thirds of the nation's economy. Many economists believe consumer spending will stay relatively healthy in the first half of the year, buoyed by larger-than-usual income-tax refund checks, a residual effect of last year's tax cuts.
And consumers don't always spend the way they feel. Confidence plunged after the Sept. 11 attacks, for example, but consumers managed to keep spending, rushing to buy new automobiles at zero-percent financing as well as other goods.
Shaky shoppers
But consumer worries about the job market worsened a bit in March, according to Tuesday's report. The percentage of survey respondents saying jobs are "hard to get" rose to 30 percent, near the highest level in a decade, from a revised 28.9 percent in February.
Still, given the recent terror attacks in Madrid, the stock market's recent weakness, and gasoline prices hitting new records every day, some economists were encouraged that confidence has not fallen further.
The University of Michigan's sentiment survey, with a smaller sample size of about 500, edged up surprisingly in March, and the ABC/Money magazine index steadied last week after falling to a 10-month low the week before.
"It is reassuring that the February drop in confidence appears to have been a one-off event rather than the beginning of a trend," said Steve Stanley, economist at RBS Greenwich Capital Markets.
On the other hand, the Commerce Department's data on consumer spending in February were weaker than expected, and some retail analysts believe higher gas prices are weighing on retail sales.
Still need job growth
In order for consumer confidence to strengthen significantly, the job market will need to improve, and fairly soon. Some economists hope there will be signs of that in the Labor Department's report on March unemployment and payroll growth, due Friday.
Economists, on average, expect payrolls grew by about 123,000 and unemployment held steady at 5.6 percent in March, according to a survey by Briefing.com.
Some analysts expect even better numbers than that, thanks to a steady decrease in layoffs, business surveys showing a rise in hiring plans and other factors, such as better weather and the end of the California grocers' strike.
But Tuesday's report of worsening consumer sentiment about the job market could be a sign that robust job growth has still not arrived.
"This is another of these little hints that we won't get a strong employment number on Friday," said Ethan Harris, chief economist at Lehman Brothers.
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