WASHINGTON - Consumer confidence snapped back more than forecast in November as US consumers turned less pessimistic on the outlook for jobs and wages, one reason why spending has jumped at the start of the holiday season.

The Conference Board's index increased to 56 from a revised 40.9 reading in October, the biggest monthly gain since April 2003, figures from the New York-based private research group showed. The gauge exceeded the most optimistic forecast in a Bloomberg News survey.

The improvement in sentiment may help sustain household purchases, which account for about 70 percent of the economy, after sales climbed on Black Friday and Cyber Monday. Another report showing home prices continue to drop raises the risk that, without a pickup in hiring, consumers will retreat in early 2012.

"We are seeing confidence returning to the ranges it's been in the past two years in this lukewarm recovery," said Guy Berger, an economist at RBS Securities Inc. While the data are consistent with the gains in holiday retail sales, "it doesn't bode for a further acceleration in spending, but more of the same", he said.

The Conference Board's confidence gauge climbed to the highest level since July, recovering from plunges in August and October that left it at a two-year low and putting it more in line with other surveys.

Other confidence gauges

The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 64.1 this month, the highest since June, from 60.9 in October. The Bloomberg Consumer Comfort Index's monthly expectations gauge climbed in November to the highest reading since July.

Economists at Credit Suisse said before Tuesday's US confidence report that there is a "seasonal tendency" for the Conference Board's measure to rise in November and drop in October.

Results of the Conference Board's survey also reflected responses from consumers before Nov 15, a week before the congressional supercommittee announced it failed to agree on a deficit-reduction plan.

Housing market

At the same time, malaise in the US housing market is a headwind for confidence and the consumer. Residential real estate prices dropped more than forecast in the year ended September, showing the industry at the center of the 2008 financial crisis continues to struggle, according to another report on Tuesday.

The S&P/Case-Shiller index of property values in 20 cities fell 3.6 percent in September from the same month in 2010 after decreasing 3.8 percent in the year ended August, the group said on Tuesday in New York. The median forecast of 32 economists in a Bloomberg survey projected a 3 percent drop.

The median projection in the Bloomberg survey called for a confidence reading of 44. Estimates of 70 economists ranged from 37 to 49.6. The index averaged 53.7 during the 18-month recession that ended in June 2009.

Employment

The Conference Board's data showed measures of present conditions and expectations for the next six months both improved.

The percent of respondents expecting more jobs to become available in the next six months and those projecting their incomes will rise both climbed to four-month highs.

Applications for jobless benefits are close to a seven-month low. Initial claims in the week ended Nov 19 stood at 393,000, near the 391,000 in the previous period that were the fewest since April 1, according to Labor Department figures.

"While hiring may not be improving much, at least the rate of layoffs is slowing," said Brian Jones, a senior US economist at Societe Generale SA, whose confidence forecast of 49.6 was the highest in the Bloomberg survey. "We have all this good news about Black Friday. I think you will see people move their consumer spending forecasts higher for this quarter."

Yellen's view

Federal Reserve Vice-Chairman Janet Yellen on Tuesday said the central bank has leeway to spur the US recovery and reduce unemployment by purchasing more assets and clarifying its plan to sustain record-low borrowing costs.

"The scope remains to provide additional accommodation through enhanced guidance on the path of the federal funds rate or through additional purchases of longer-term financial assets," Yellen said. She said economic growth in the US and other advanced economies "has been proceeding too slowly to provide jobs for millions of unemployed people".

The Conference Board report showed the share of consumers who said jobs were currently plentiful climbed to the highest level since May 2009. Confidence rose in eight of nine US regions.

Bloomberg News