Feb. 12 (Bloomberg) -- Confidence among U.S. consumers unexpectedly fell in February from a two-year high, signaling Americans may not be convinced the job market is turning around. The Reuters/University of Michigan preliminary consumer sentiment index dropped to 73.7 from January’s 74.4. The measure averaged 88.9 during the economic expansion that ended in December 2007.
Employment unexpectedly dropped in January, while an increase in the workweek signaled companies were on the verge of boosting payrolls after economic growth picked up last quarter. The Obama administration yesterday projected employment will grow by 95,000 a month on average this year, indicating it will take a long time to recover the 8.4 million jobs since the recession began.
“The ongoing weakness in the labor market in the United States and relatively low income growth is not going to allow for any sort of meaningful bounce in any of the consumer sentiment indicators,” said Stephen Gallo, head of market analytics at Schneider Foreign Exchange in London, who accurately forecast the index.
The consumer sentiment index was forecast to rise to 75, according to the median of 74 economists surveyed by Bloomberg News.
A separate report from the Commerce Department today showed sales at U.S. retailers climbed in January for the third time in four months. The 0.5 percent increase was larger than forecast and followed a 0.1 percent drop the prior month that was smaller than previously estimated. Purchases excluding autos rose 0.6 percent.
Slow Recovery
The Michigan sentiment has been slow to recover after reaching a three-decade low of 55.3 in November 2008.
In today’s report, the measure of current conditions, which reflects Americans’ perceptions of their own finances and whether it’s a good time to buy big-ticket items such as cars and homes, rose to 84.1 this month from 81.1 in January.
The index of expectations six months from now, which more closely projects the direction of consumer spending, decreased to 66.9 from 70.1 last month.
Consumers in the Michigan survey said they expect an inflation rate of 2.7 percent over the next 12 months, compared with 2.8 percent projected in January. Over the next five years, the figure tracked by Federal Reserve policy makers, Americans expected a 2.8 percent rate of inflation, down from 2.9 percent in last month’s survey.
Labor Market
The focus of Americans’ outlooks and ability to spend will be on the labor market. Initial jobless claims fell to 440,000 last week, the Labor Department said yesterday.
Even so, the unemployment rate will average 9.8 percent this year, according to a Bloomberg News survey of economists taken earlier this month and some companies are still shedding jobs.
United Parcel Service Inc., the world’s largest package- delivery company, plans to furlough at least 300 pilots unless it can find more savings in a joint effort with the employees’ union, the company said Feb. 8. This would be in addition to the 1,800 job cuts it announced in January for its small-package unit.
“Even though the economy has begun to turn around, UPS anticipates a very gradual recovery and a continued need to for belt-tightening,” Bob Lekites, president of UPS Airlines, said in a statement.
