Dec. 12 (Bloomberg) -- U.S. consumer sentiment unexpectedly fell this month after two months of gains as the economy created fewer jobs than forecast in November, a sign Americans may still be concerned about job security.
The University of Michigan's preliminary December consumer sentiment index fell to 89.6 from 93.7 in November, compared with the median forecast of a jump to 96 in a Bloomberg News survey. Last month's index was the highest in more than a year and a half.
``This is consistent with the fits and starts we're seeing in the recovery,'' said William Quan, director of research at Mizuho Securities USA Inc. in Hoboken, New Jersey, and whose forecast of 94 was the lowest in the survey. ``This recovery is not a moonshot like other recoveries. We're not going to go from 10 miles-per- hour to 100 miles-per-hour right away.''
The U.S. added 57,000 jobs in November, fewer than most economists had forecast, restrained by a grocery worker strike in California and 40 consecutive months of decreases in manufacturing positions. Business investment in new technology and supplies may take up the slack of slower growth in consumer spending this quarter, economists said.
Economists had forecast a reading of 96 in the index, the median of 54 estimates in a Bloomberg News survey. The Michigan preliminary index comes from a poll of about 250 households. A final index comprised of twice as many homes is released at the end of the month.
The current conditions index, which reflects perception of consumers' financial situation and whether it's a good time to make major purchases, fell to 93.6 this month, the lowest since May, from 102.5 in November. The expectations index, based on optimism about the next one to five years, fell a full percentage point to 87.1.
Market Reaction
Treasuries rose after the confidence report bolstered speculation the Federal Reserve will delay raising its benchmark interest rate. The benchmark 10-year note due in November 2013 rose 9/32 point, pushing its yield down 4 basis points to 4.19 percent at 10:30 a.m.
The Michigan sentiment index has risen from 77.6 since March, when concern about the war in Iraq sent the index down to 77.6, the lowest level since August 1993.
A separate survey by the Conference Board, released last month, jumped 10 points to 91.7, the highest in fourteen months.
Federal Reserve studies have shown confidence indicators don't always predict changes in spending patterns. In August and September, as the consumer sentiment index fell to 89.3 and 87.7, respectively, personal spending rose, bolstered by recently enacted reduced income tax withholding rates and rebate checks.
Still, economists said the general rise in confidence suggests consumer spending will help boost economic expansion next year.
The U.S. economy may expand 4.4 percent next year, the most since 1997, according to the median of 62 economists' forecasts in a Bloomberg survey. Consumer spending is expected to gain at an average 3.7 percent annual rate next year.
``We have enhanced tourism in the U.S. as well as the first significant job growth in several years,'' Coach Inc. Chief Executive Lew Frankfort said in an interview this week. ``TAll of that creates an environment where luxury goods are better positioned than they have been the last several years.''
Coach, the largest U.S. seller of luxury leather goods, expects sales at stores open at least a year to rise more than 10 percent this quarter.
Retail sales rose a higher-than-expected 0.9 percent last month to $322.4 billion, the Commerce Department said yesterday.
First-time applications for unemployment benefits rose to 378,000 last week, the highest level in six weeks, partly because some workers fired the week of Thanksgiving waited to file, the Labor Department reported. Weekly unemployment claims have stayed below 400,000 the past 10 weeks. Some economists consider that to be the cut off between labor market expansion and contraction.
Gains in the Dow Jones Industrial Average and the Standard & Poor's 500 index since the beginning of November after rising 18 percent and 19 percent, respectively. The Dow has risen 1.26 percent the past six weeks and surpassed 10,000 earlier this week for the first time in a year and a half before settling back down. The S&P has risen less than 1 percent since Nov. 3.
