Updated from 10:59 a.m. EST
A disappointing reading on consumer confidence reflects lingering stress in the labor markets but doesn't presage another recession, analysts said.
The Conference Board's Consumer Confidence index dropped to 80.3 in December from 84.9 in November, below the average prediction of economists for a reading of 86. The print initially sent stocks to session lows, though they've since rebounded to roughly unchanged.
Among the index's components, the present situation gauge fell to a nine-year low of 69.9 from 78.3 in November. The expectations index fell to 87.2 from 89.3.
"The major factor dampening consumers' spirits has been the rising unemployment rate and the discouraging job outlook," said Lynn Franco, head of the board's consumer research center. "Weak retail sales over the holidays clearly reflect the current mood of consumers."
She added that job security is usually the most important determinant of consumer confidence. The report showed that the percentage of people who say jobs are hard to get rose to 29.8 percent from 27.3 percent; those who say jobs are plentiful fell to 12.4 percent from 14.2 percent. "Until the labor market improves consumers will remain cautious in their spending and outlook," Franco concluded.
Some feel the report provides an overly pessimistic view, and discount its predictive powers. They also note that consumers expecting business conditions to improve in the next six months edged up 1 percentage point to 20.8% while those expecting conditions to worsen fell slightly to 11%.
"Given the fact that the University of Michigan Consumer Sentiment index rose slightly in December, it is probably safe to say that consumer sentiment changed very little in December," said Gary Pullman, an economist at Delaware Investments, a Philadelphia-based money management firm. He thinks that the two indices are prone be volatile, noting that people perceptions can swing widely depending on very recent events and "therefore the data is filled with a lot of noise."
While Pullman concede that the overall trend is troubling and difficult to dismiss, the index has been trending down since it peaked in early 2000 at 144.7 and just hit a nine year low of 79.6 this past October, he feels the mood is reflective of current conditions rather than a cause of them.
He believes "the concern that a low confidence number will result in decreased consumer spending and create a self-fulfilling scenario is misplaced," saying the market is already pricing in a slowdown in consumer spending and geopolitical uncertainty.
The bottom line for Pullman is that the index provides a snapshot in time but offers little future insight. "The average person's ability to predict the future is just as bad as economists'," he concludes.