By Shobhana Chandra
WASHINGTON - The most Americans in six months said the economy in July was getting worse, indicating the slowdown in hiring is dimming moods as the third quarter begins.
The share of households viewing the U.S. as heading in the wrong direction rose to 36 percent, the highest since January, from 33 percent in June. The Bloomberg monthly expectations gauge was minus 11, matching June as the lowest level since January. The weekly Bloomberg Consumer Comfort Index fell to minus 37.9 in the period ended July 15, the lowest in a month.
Limited wage gains and unemployment stuck above 8 percent risk further slowing consumer spending and leaving the U.S. more vulnerable to a global slowdown. There is also growing pessimism little is being done in Washington to avoid the so-called fiscal cliff at the end of the year, when higher taxes and automatic spending cuts kick in, raising the risk of recession.
“A soft labor market and political tensions surrounding potential changes in tax policy are weighing on consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Consumers are concerned about their incomes and have become much more cautious about spending. The economy is limping into the third quarter.”
A report from the Labor Department today showed applications for jobless benefits increased by 34,000 to 386,000 in the week ended July 14. The median estimate of economists in a Bloomberg News survey called for 365,000 claims. A Labor Department spokesman said the figures were skewed by a change in the timing of annual auto factory layoffs.
The Standard & Poor’s 500 Index rose 0.2 percent to 1,375.29 at 9:32 a.m. in New York amid better-than-estimated earnings at companies including International Business Machines Corp. and EBay Inc.
Two of the three components of the weekly consumer comfort index deteriorated. A measure of personal finances declined to a four-week low of 0.7 from 1.9, and an index of the buying climate eased to minus 41.7 from minus 41.5. A measure of Americans’ views of the state of the economy held at minus 72.8.
Confidence among full-time workers dropped to minus 31.9 last week, the lowest since February.
The report is “the latest blow for economic sentiment, already in the midst of an extended slump,” said Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg.
The sentiments in the comfort report were reflected in Federal Reserve Chairman Ben S. Bernanke’s testimony to Congress this week, in which he projected “frustratingly slow” progress on unemployment and noted decelerating economic activity and depressed consumer sentiment, Langer said.