RPT US consumers optimistic about jobs but may not be spending as a result

RPT US consumers optimistic about jobs but may not be spending as a result

	Published : Tue, 31 Jul 2007 20:30 By : Agencies Print this Story

(repeating to amend headline)

WASHINGTON (Thomson Financial) - The latest reports show US consumers are confident they can keep their jobs or get new ones, but it's not clear they'll spend more as a result, say less optimistic economists.

'Consumers are especially upbeat about the job market,' said David Resler at Nomura Securities based on the latest consumer confidence survey.

Jobs are 'plentiful' according to 30.5 pct of people responding to the July Conference Board report. That's the highest percentage since August of 2001.

But Roger Kubarych of UniCredit warns 'there is little direct connection between what consumers say and how much they spend.' The survey said people's plans for buying cars and houses picked up, for example, which may be more about desire than ability.

The Labor Department's July jobs report is due out on Friday. It's expected to show 135,000 new non-farm payroll jobs and a steady 4.5 pct unemployment rate.

The employment picture could look even better than that. The jobs 'hard to get' reading in the confidence survey fell almost two points to 18. That index 'has a 91 pct correlation with the unemployment rate,' says Myra D'Souza at Thomson IFR Markets, suggesting that 'if anything, a drop is now more likely.'

But steady job and income growth into June didn't prevent consumers from spending less and saving more. The Commerce Department reported consumer spending up just 0.1 pct for the month with durable goods hurt the most.

Daiwa Securities economist Michael Moran says 'consumer spending will need to pick up to post respectable results for the third quarter.'

The Conference Board survey was taken before the Wall Street turmoil last week. More optimistic economists say continued solid job growth will help people shrug off the financial and housing market uncertainties.

Paul Kasriel at Northern Trust isn't one of those optimists. He thinks spending has been held up only by people borrowing against mortgage equity and taking profits in stocks.

'If households had to depend only on their income from employment and other sources to fund their consumer spending,' he says, 'we would observe much slower growth in consumption.'

Without home-equity lending and private equity deals pushing up stocks, Kasriel thinks growth in real consumer spending could be close to zero.

dennis.moore@thomson.com

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