Confidence in U.S. stagnates as employment stalls

Consumer confidence stagnated last week as scant improvement in the labor market left Americans more discouraged about the economy.

The Bloomberg Consumer Comfort Index held at minus 37.5 in the week ended July 8. Some 86% of those surveyed said the economy was in bad shape, 21 percentage points higher than the average since 1985.

“Consumers remain generally downbeat about the economy and expectations for the future,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Given slower job growth and the recent stabilization of oil and gasoline prices near current levels, there is little impetus to support an improvement in overall sentiment in the near term.”

Gasoline prices that are no longer falling along with the labor market’s worst quarterly performance since the first three months of 2010 risk stifling the consumer spending that accounts for 70% of the U.S. economy. Flagging sentiment stretches around the globe, according to a Pew Research Center report that showed Europe’s debt crisis is taking a toll.

The public mood about the economy has worsened since 2008 in eight of 15 countries providing comparable data, the Pew report said. Some 16% of Europeans said they believe their economy is doing well, the survey showed.

JOBLESS CLAIMS
Another report today showed fewer Americans than forecast filed first-time claims for unemployment benefits last week, reflecting the volatility of applications during the annual auto-plant retooling period.

Claims for jobless insurance declined 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, the Labor Department said. Economists surveyed by Bloomberg projected 372,000 claims, according to the median projection.

“You can never take claims at face value because of the July shutdowns,” said Jonathan Basile, an economist at Credit Suisse in New York, who projected the number of applications would drop to 355,000. “We are in a period of uncertainty. This makes for a situation where businesses will hold off on taking risks regarding investment and payrolls.”

PRICE PRESSURES
Prices of imported goods decreased more than forecast in June as declining energy costs curbed inflation, another Labor Department report showed. The 2.7% plunge in the import-price index was the biggest since December 2008 and followed a 1.2% drop in May. Prices excluding fuel fell 0.3%, the most in almost two years.

Fuel costs that are creeping higher and limited job opportunities may be giving Americans less to cheer about. After reaching a recent low of $3.33 a gallon on July 1, the average price of gasoline nationwide was $3.38 yesterday (July 11), according to AAA, the country’s biggest motoring organization.

Employment at companies increased 84,000 in June after a 105,000 gain a month earlier, the Labor Department said July 7. The so-called underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — increased to 14.9% from 14.8%.

“The job market is a strong correlate of consumer confidence,” Gary Langer, president of Langer Research Associated in New York, which compiles the index for Bloomberg, said in a statement. The jobs report “underscores the public’s long-running economic frustration. While consumer sentiment isn’t worsening, it’s far from the levels associated with a robust economy.”

CONSUMER CONFIDENCE DETAILS
Today’s Bloomberg report showed 71% of consumers said it was a “bad time” to buy, 7 percentage points worse than the average since weekly surveys began in 1985.

The Bloomberg index of the state of the national economy fell to minus 72.8, the lowest level since Feb. 19, from minus 71.7 the previous period. The measure of whether consumers consider it a good time to buy climbed to minus 41.5 from minus 42.4 the prior week. The index of personal finances was little changed at 1.9 after 1.8.

Confidence dropped for those with incomes of $100,000 or more. The index decreased to minus 8.2, the lowest reading since January. It marked the second straight week of negative readings after 13 weeks above zero.

In a sign higher-income earners are pulling back, Burberry Group Plc reported sales yesterday that missed analysts’ estimates for a second straight quarter, fueling concern that Europe’s debt crisis and slowing growth in China are taking a toll on demand for high-end goods.

Today’s figures also showed Democrats recording higher sentiment than Republicans for a record 16th consecutive week. Republicans’ confidence dropped to the lowest level since the end of February.

Sentiment among independents rose to minus 43 from minus 46.8 last week. Even with the gain, the figure is one of the five lowest this year and 22.6 percentage points lower than the long-term average for the group.