Consumer confidence rebounded in April from a one-year low on hopes that an improving economy will continue to create jobs, according to the IBD/TIPP Economic Optimism Index out Tuesday. The gauge rose 3 points from March to 48.4. Readings below 50 signal pessimism. The six-month outlook jumped 5.5 points to 51.9, the best since last September.
The poll was conducted after the Labor Department said on April 2 that employers added 162,000 jobs in March, the most in three years. Unemployment, however, stayed at a near-26-year high of 9.7%.
"Though the unemployment rate hasn't improved, there are signs that there's activity there that causes some amount of optimism," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
But he added that the survey showed that "we're still not out of the woods" due to lingering concerns that the economy could pull back as government stimulus wanes heading into next year.
Meanwhile, most economists expect only modest job growth, which could keep a lid on consumer spending and dampen the rebound.
Analysts said GDP growth likely cooled in Q1 after expanding at a 5.6% annual rate in Q4, as the boost from inventory rebuilding tapers off.
The National Bureau of Economic Research, the official arbiter of U.S. business cycles, said Monday that "although most indicators have turned up," it was too early to declare an end to the deep recession that began in December 2007.
But the jobs report, retailers' robust March sales and accelerating activity in the manufacturing and service sectors point to a strengthening economy, though housing and commercial real estate remain weak.
Personal Outlook Improves
IBD/TIPP's personal financial outlook, which gauges Americans' views about their own finances six months out, rose 2.3 points to 53, still below normal. "I would like to see the personal financial outlook in the mid-50s," Mayur said.
The overall IBD/TIPP Economic Optimism Index jumped above 50 in the Northeast and the South but fell slightly to the mid-40s in the West and Midwest.
"I would expect the Midwest to be a laggard because of the intensity of job losses," Mayur said. Michigan has the nation's highest unemployment rate at 14.1%. Indiana, Illinois and Ohio also have jobless rates above the national average.
Meanwhile, an index of small-business optimism fell 1.2 points in March to 86.8, a record 18th consecutive month below the key 90 mark, the National Federation of Independent Business said Tuesday. It was the worst reading since last July.
"Something isn't sitting well with small-business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy," said William Dunkelberg, NFIB's chief economist, in a prepared statement.
Nine of the survey's 10 components fell or were unchanged from February.
Small businesses, the main drivers of job growth, continue to shed employees, the survey showed. It also showed deterioration in gauges of capital spending, sales and earnings expectations and credit availability.
A net 8% expect the economy to worsen over the next six months, one point lower than in February.
Meanwhile, the IBD/TIPP Presidential Leadership Index rose 1.1 points to 51.1, ending a nine-month slide. Economic confidence and passage of Obama's health care agenda may have helped.
"That helps because the health care debate was always a reminder of deficits, higher taxes and bigger government," Mayur said. "Now that it is off the radar, it's not constantly haunting you when you switch on the TV or open up the newspaper."
However, the gain was modest. Other surveys generally show Obama's approval rating weakening over the last couple of weeks.
The budget deficit is expected to rise this year to a record $1.56 trillion as the government boosts spending to bolster the economy. White House officials hinted Monday that the deficit may dip to "only" $1.3 trillion.
Americans still have a negative view of how Obama is handling the economy and the budget, especially among those that have strong opinions on those issues. But the readings improved significantly from March.
The index of confidence in federal economic policies rose 1.2 points to a still-weak 40.4. Republicans remained far more pessimistic than Democrats. Confidence among independents climbed 4.5 points to 35.9.
IBD/TIPP conducted the national telephone poll of 924 adults from April 5-11.