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By Bob Willis

Nov. 24 (Bloomberg) -- Confidence among U.S. consumers unexpectedly rose in November as a brightening outlook masked growing concern over joblessness.

The Conference Board’s confidence index increased to 49.5 from 48.7 the prior month. The New York-based Conference Board’s index, which focuses on the labor market and purchase plans, averaged 58 in 2008 and 103.4 in 2007.

The report showed Americans fretted over jobs, signaling the highest unemployment rate in 26 years may restrain spending and limit the recovery from the worst recession since the 1930s. Target Corp. last week said it remains cautious about sales this quarter and expects to offer incentives spur holiday shopping.

“Labor market perceptions are very weak,” said David Sloan, chief U.S. economist at 4Cast Inc. in New York, who forecast an increase in confidence. “What did drive is up was expectations, optimism that things will get better, not that things have gotten better.”

Other reports today showed home prices rose and the economy grew at a slower pace last quarter as consumer spending climbed less than the government previously estimated.

Stocks Fall

Stocks dropped following the reports on concern over the outlook for household purchases. The Standard & Poor’s 500 Index fell 0.6 percent to 1,099.45 at 10:23 a.m. in New York.

Federal Reserve Chairman Ben S. Bernanke last week said joblessness and limited bank lending were “headwinds” for the economy.

Economists forecast confidence would decrease to 47.3 from a previously reported 47.7 for October, according to the median of 74 projections in a Bloomberg News survey. Estimates ranged from 40.7 to 53.

The S&P/Case-Shiller home-price index of 20 U.S. cities increased 0.3 percent in September from the prior month on a seasonally adjusted basis after a 1.1 percent rise in August, the group said today in New York. The gauge fell 9.4 percent from September 2008, the smallest year-over-year decline since the end of 2007.

The world’s largest economy expanded at a 2.8 percent annual rate in the third quarter, down from the 3.5 percent pace estimated last month, the Commerce Department reported today. The figures also showed corporate profits climbed 10.6 percent, the most in five years.

Job Concerns

The Conference Board’s measure of present conditions decreased to 21, the lowest level in 26 years, from 21.1 the prior month. The decrease reflected growing concern over unemployment with a measure of job availability reaching the lowest level since 1983.

The share of consumers who said jobs are plentiful fell to 3.2 percent from 3.5 percent, according to the Conference Board. The proportion of people who said jobs are hard to get increased to 49.8 percent from 49.4 percent.

The gauge of expectations for the next six months climbed to 68.5 from 67 the prior month.

The proportion of people who expect their incomes to rise over the next six months decreased to 10 percent from 10.7 percent. The share expecting more jobs dropped to 15.2 percent from 16.8 percent.

Buying plans for automobiles and real estate dropped this month, the report showed. Home-buying expectations decreased to the lowest level since 1982.

Less Income

“Income expectations remain very pessimistic and consumers are entering the holiday season in a very frugal mood,” Lynn Franco, director of the Conference Board’s Consumer Research Center, said in a statement.

The U.S. has lost 7.3 million jobs since the recession began in December 2007 and more losses are forthcoming. Goldman Sachs Group Inc. chief U.S. economist Jan Hatzius forecast earlier this month that unemployment would average 10.4 percent next year.

Citing the labor market as an “area of great concern,” Bernanke last week told the Economic Club of New York that “jobs are likely to remain scarce for some time, keeping households cautious about spending,”

AOL, the Internet unit being spun off from Time Warner Inc. in December, plans to cut about one-third of its 6,900 employees over the next several months. The company will begin a voluntary layoff program Dec. 4 and said it’s looking for as many as 2,500 volunteers, AOL spokeswoman Tricia Primrose said in an e-mail last week. The company will make up the shortfall of volunteers through firings, she said.

Smaller Purchases

Saks Inc., the U.S. luxury retail chain, and Target, the second-largest discount chain, last week said they remain cautious about demand after reporting third-quarter earnings that beat analysts’ estimates. Target said average transaction sizes shrank in November and fourth-quarter comparable-store sales may fall after third-quarter earnings rose more than analysts projected.

Target expects a “highly promotional” holiday season, Chairman and Chief Executive Officer Gregg Steinhafel said on a conference call. November sales “provide additional justification for being cautious in this uncertain environment,” he said.

Lending rates near record lows and government incentives such as “cash for clunkers” and first-time homebuyer credits have helped spur purchases of cars and houses in recent months.

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
Last Updated: November 24, 2009 10:25 EST