Consumer confidence rose a bit in January as Americans' hopes rose that the budding recovery will start to create jobs soon, according to the IBD/TIPP Economic Optimism Index on Tuesday.
The gauge climbed 2 points from December to 48.8. It was the first gain in four months, but the sub-50 reading still indicates pessimism. Yet the six-month outlook gauge shot up 5.1 points to 51.8, the first upbeat reading since September.
The economy grew at a 2.2% annual rate in Q3 and many economists expect Q4 growth to accelerate to a 4% rate or more, boosting expectations that the deepest recession in decades has ended.
Still, employers shed a greater-than-expected 85,000 jobs in December and the unemployment rate stands at 10%, near a 26-year high. Most economists expect modest job growth to resume in early 2010, but unemployment should stay stubbornly high.
"The defining thing is going to be jobs, jobs, jobs. There is no shying away from that," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. "We have a new year and people are hoping that the economy will continue to go, and they've also been told to wait for mid-2010 for the jobs to come."
The stock market rally, which began in early March also is lifting spirits.
But the personal financial outlook, which gauges Americans' views about their finances six months out, edged down 0.2 point to 53.4. That subindex's decline may reflect underlying uncertainty about the strength of the economic recovery.
The IBD/TIPP Economic Optimism Index remains far below the level when it came out of the previous recession in December 2001, when the gauge spiked above 60.
"This is more like a choppy recovery," Mayur said, adding that the last recession was much shorter and less severe.
Confidence was weakest in the Midwest, where job losses from the auto industry and manufacturing overall have been particularly heavy.
Meanwhile, an index of small-business optimism slipped 0.3 point in December to 88, off the March low of 81 but the lowest since July, the National Federation of Independent Business said Tuesday.
"Continued weak sales and threatening domestic policies from Washington have left small-business owners with little to be optimistic about in the coming year," said William Dunkelberg, NFIB's chief economist, in a prepared statement.
Small businesses, the main drivers of job growth, continue to shed employees but at a slower pace, the survey showed.
Still, Dunkelberg said, "There is no indication that job growth will be strong enough to dramatically reduce the unemployment rate."
Inventories are also shrinking as firms bring stocks in line with slower sales, and credit remains tight. A net 2% expect the economy to improve in the next six months, down a point from November.
"Small-business owners continued to liquidate inventories, and weak sales trends gave little reason to order new stocks," Dunkelberg said.
In the IBD/TIPP survey, the index of confidence in federal economic policies rose a point to 41.2. Americans' views were predictably partisan, with Democrats upbeat and Republicans very negative. But, critically, independents were the most pessimistic since April.
The weak economy and concerns about Democratic health plans have hurt President Obama's approval ratings. The IBD/TIPP Presidential Leadership Index fell 1.9 points to 50.8 in January. That's just barely positive and down sharply from the reading of 71 he enjoyed shortly after taking office in February.
With Democrats facing potentially big election losses in 2010, President Obama and Congress have proposed a new round of stimulus to try to boost employment and convey the message that they are taking action.
IBD/TIPP conducted the national telephone poll of 923 adults from Jan. 4 to Jan. 9.