Confidence among U.S. consumers fell last week to a two-month low. as gyrations in the stock market and stagnant wages overshadowed gains in employment.
The Bloomberg Consumer Comfort Index was at 36.2 in the period ended Aug. 3, the lowest level since June 8 and little changed from 36.3 the prior period.
Gauges of households’ finances and the state of the economy also retreated to the lowest levels in two months.
Consumers may be pessimistic about their balance sheets as volatility in the stock market erases wealth gains from earlier in the year, and wage gains barely keep up with inflation.
Continued improvement in the labor market will be needed to push incomes higher and burnish confidence, giving households the resources to spend at a faster clip.
“A few more months of improved data and the confidence will assuredly be higher,” said Richard Yamarone, a senior economist at Bloomberg LP in New York. “Economic conditions are slow improving -- prices at the pump are lower and job creation is registering some desirable numbers. This is a recipe for a more upbeat consumer.”
Another report Thursday showed fewer Americans filed applications for unemployment benefits last week, sending the average over the past month to an eight-year low.
Jobless claims decreased by 14,000 to 289,000 in the week ended Aug. 2 from 303,000 in the prior period, a Labor Department report showed.
The gauge of personal finances fell to 50.1 last week, the lowest level since the period ended May 25, from 50.7 in the previous week, according to the comfort report. The measure of the economy declined to 25.8, the lowest since June 8, from 26.4.
The buying climate index, which asks whether this is a good time to make purchases, rose to 32.6 last week from a one-month low of 31.9.
Volatility in the stock market may be undermining the confidence of some consumers, as geopolitical tensions abroad and speculation that the Fed will accelerate a reduction of monetary stimulus concern investors.
The Dow Jones Industrial Average is down 0.8 percent this year through Wednesday after it erased its earlier gains.
Meanwhile, the Standard & Poor’s 500 Index, while up 3.9 percent for the year, has fallen 3.4 percent from a record high reached July 24.
Rising prices in the face of stagnant wages may also be giving some consumers cause for caution.
Average hourly earnings were little changed at $24.45 in July and up just 2 percent over the past 12 months, a Labor Department report showed last week.
Inflation is chipping away at that income, with the Fed’s preferred gauge of inflation rising 1.6 percent in June from the year before, compared with a 1.2 percent climb in January. The Fed targets price gains of 2 percent.
Households have found some relief in gasoline prices, which have declined since late June after increasing earlier this year. A gallon of regular cost an average $3.48 on Aug. 5, the lowest price in five months.
Further gains in the job market may support attitudes about finances and the economy, in addition to giving consumers the means to spend.
Payrolls climbed by 209,000 workers in July after a 298,000 increase the previous month that was larger than first estimated, the Labor Department said earlier this month.
Companies such as Ford Motor Co. (NYSE: F) are hopeful those gains will translate into more consumer spending, which makes up 70 percent of the economy.
While there’s still ground to cover in the labor market, “conditions there have improved in recent months by many measures,” Emily Kolinski Morris, senior U.S. economist at Ford, said on a sales call on Aug. 1.
“Consumer sentiment is steady and incomes are slowly gaining ground,” Morris said. “These incoming indicators coupled with a supportive policy backdrop should provide positive momentum for the economy into the second half.”
Sentiment fell in three of seven income brackets last week, with those making $40,000 to $49,900 leading the retreat.
Meanwhile confidence among households making $75,000 to $99,000 rose 3.4 points to 52.9, the highest since late September.
The sentiment of unemployed Americans dropped to a six- month low of 28.3. That widened the confidence gap between the jobless and those who work full-time to the second-biggest in a year.
Among the regions, the Northeast showed the biggest drop in confidence last week, falling 2.1 points to 31.5, the lowest level since the week ended May 25. Sentiment also fell in Midwest and West, while it rose in the South.
The Bloomberg Comfort Index has been presented on a scale of zero to 100 since May, rather than the previous minus 100 to 100, with the midpoint shifting to 50 from zero.
The change is also reflected in the gauge’s components. It doesn’t affect the measures’ relationship to each other or their correlation with other economic indicators.
Historical data has been revised and analysis of trends, values and other variables also aren’t affected.