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U.S. Households Cheer Stronger Employment Data

An improving jobs picture sent consumer confidence up for six straight months through February, as Americans gained hope the economy is improving. Even people who said their own finances remained in poor shape felt more hopeful about the overall economy.

The University of Michigan’s Consumer Sentiment Index rose to 75.3 in February, up from a 31-year low of 54.9 in August 2011. That followed news that America’s unemployment rate had fallen to 8.3% in January. It had been at 9.1% in August, down from a 2009 high of 10%.

Consumer sentiment rose despite the fact that more households said their income had dropped from the previous month, and a majority said they did not think their income would grow during the next year.

Most economists are backing up this consumer optimism. A survey by the National Association for Business Economics in late February showed economists expect unemployment to remain at 8.3% this year. That’s a significant improvement from their November forecast of 8.9%.

The economists also predict job growth will accelerate next year and the jobless rate will fall to 7.8%. They forecast the U.S. economy will grow 2.4% this year, up from 2011, when economists believe the economy grew 1.6%.

The improving outlook among consumers and economists bodes well for 2012, as stock markets tend to rise on positive sentiment.

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This article was written by a professional financial journalist for Clark Planning & Investment Advisory and is not intended as legal or investment advice.

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