By Gwynn Guilford 

Consumers are growing more optimistic about the state of the U.S. economy, according to September surveys, as the labor market continued to gradually improve and a summer coronavirus surge receded in parts of the country.

The Conference Board, a private research group, said its index of consumer confidence surged to 101.8 in September, from a revised 86.3 in August. The increase was the biggest since April 2003 -- reversing two months of decline and bringing the index to its highest level since March, when the coronavirus pandemic thrust the U.S. economy into a recession. This month's preliminary reading on consumer confidence was based on survey responses collected Sept. 1-18.

Consumer bullishness likely reflected in part consistent improvements in the labor market. The share of respondents in the Conference Board's index reporting jobs as "plentiful" climbed to 22.9% in September, from 21.4% in August -- and compared with just 16.5% in May.

The August unemployment rate plummeted to 8.4%, from 10.2% in July. Economists expect continued, if less dramatic, improvement in September, with those surveyed by The Wall Street Journal a payrolls gain of 800,000 this month, bringing the unemployment rate to 8.2%.

Coronavirus trends are also a likely factor, said Pooja Sriram, U.S. economist at Barclays. She noted the steady drop in confidence in July and August accompanied an outbreak in California, Florida and other large states.

"With the rise of covid cases in the summer, worries about whether headed for another period of shutdown orders may have been weighing on consumers' views in August," Ms. Sriram said. "The labor market has seen steady improvement. There's a long way to go but there's been a fairly consistent contribution to payrolls each month."

The preliminary September reading of the University of Michigan's index of consumer sentiment, released Sept. 18, registered a less dramatic increase, climbing to 78.9 for the first half of the month. It was also the highest level since March, though it rose only 4.8 points over August. The University of Michigan will publish its final reading for the month on Friday, October 2.

The sense of optimism among consumers also may depend somewhat on where people live. Consumer confidence boomed in New England and the Pacific in September. However, optimism slipped in the West North Central region, which includes the Dakotas, Iowa, Minnesota, and Missouri, states that have suffered coronavirus flare-ups in the last month.

That suggests that the pandemic is still coloring the moods of consumers, and hints that another outbreak could reverse the optimistic upturn.

While the labor market continues to recover, real-time data suggest momentum has slowed. The share of small-business employees working who had logged hours in January fell slightly in September, according to Homebase, a provider of scheduling and time management software. The roughly 500,000 employees it tracks are mostly hourly workers in restaurants, retailers, hair salons and other Main Street businesses.

This reflects in part a sluggish spending on services, which has recovered much less than spending on goods.

"Yes, jobs are returning and the federal income support has been a big income booster and equities have more than recovered their losses, but worries about the virus continue to linger and will continue to constrain how we go about our daily lives for many more months," said James Knightley, chief international economist at ING.

Write to Gwynn Guilford at gwynn.guilford@wsj.com

(END) Dow Jones Newswires

September 29, 2020 14:51 ET (18:51 GMT)

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