NEW YORK (CNN/Money) -
U.S. consumers planned to take on less debt in October and the months to come, due in part to worries about weakness in the labor market, a credit research group said Tuesday.
The Cambridge Consumer Credit Index, the product of a monthly survey by Cambridge Credit Counseling Corp. of a little more than 1,000 homes about their plans for future credit use, fell to 58 in October from 61 in September.
That measure of credit demand matched the average rate for 2002, however, and was higher than a 52 reading a year ago.
Somewhat more ominous was a dramatic drop in the index that measures plans for credit use six months from now, to 70 from 80 in September, the lowest level since 68 in February.
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"The big story that the overall index is telling us is that consumers are still hanging in there, but this question that refers to credit use six months out is the first indicator that maybe there's some softness that could be developing in consumers' attitudes," said Cambridge senior economist Allen Grommet.
The reason for this drop in credit-use plans is connected to the results of a separate "wild card" question Cambridge asked this month, about consumers' job security. While 45 percent of respondents said they felt very secure in their jobs, 33 percent said labor-market worries had cut their appetite for credit card and other debt.
"There's a significant portion of people out there not sure on a day-to-day basis where they stand," Grommet said. "That affects consumer confidence and affects consumers' desire to take on more credit."
Surveys seem in synch
The Cambridge survey is less than two years old and is not a major economic indicator. But its results echo those of other, more established surveys of consumer confidence, which have stalled in recent months, as the labor market has been mired in its longest slump since World War II.
The consumer confidence index compiled by the Conference Board, a New York research group, is the broadest and most closely watched. It fell in September to its lowest level since March and has been stagnant since April. The percentage of respondents saying jobs were "hard to get" rose to the highest level in nine years.
The University of Michigan's consumer sentiment index also fell in September, and the ABC/Money weekly confidence index has been mired in a range for several weeks.
Consumer spending doesn't always reflect consumer sentiment, of course, and consumers have continued to spend in recent years, despite a recession, terror attacks, two wars, a bear market in stocks, corporate scandals and other woes.
But some economists worry that lingering job fears, combined with already high levels of consumer debt, could prevent consumers from ramping up their demand for goods and services, slowing down economic expansion.
Markets were heartened Friday when the Labor Department said non-farm payrolls grew in September for the first time since January, but economists urged caution. The gain was small, they said, and the labor market has had at least one false start in the past two years -- it will take at least a few months of strong job growth before the labor market can be declared on the rebound.
"It is true that payrolls expanded [in September], but many workers are being forced to take lower skilled, lower paying jobs," said John Challenger, CEO of Chicago outplacement firm Challenger Gray & Christmas, which tracks monthly job-cut announcements. "In some cases, workers are earning 43 percent less in each paycheck. More people are working part-time jobs. Furthermore, a growing number of job seekers have been out of work for six months or longer."
"None of this bodes well for retailers depending on strong holiday sales, nor for the entire economy, which has mostly relied on consumer spending to keep it afloat," Challenger added.
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