New Data Paint a Picture of Anxiety : Economy: Monthly consumer confidence and home sales figures show declines. Economists cite job worries.

NEW YORK — Reports of lower consumer confidence and falling home sales added to a picture of U.S. economic weakness Wednesday, raising expectations that the Federal Reserve Board will lower interest rates again early in 1996.

Economists said the latest data reflect consumer worries about job security, leading to lower spending on everything from new homes to Christmas gifts. The anxiety was evident in anemic sales during the holiday season, one that many merchants called one of the worst in years.

“People are afraid they may get laid off or change jobs and not get paid as much, so they’re being very cautious,” said Carl Steen, an economist at Maria Fiorini Ramirez Inc., a New York financial markets research firm.

The Conference Board, a prominent business research group, said its widely followed monthly index of consumer confidence fell to 98.7 in December from 101.6 in November.

The index, based on a 1985 base of 100, is derived from responses to questionnaires sent to 5,000 households nationwide. It is considered an important barometer of consumer willingness to borrow and spend. Consumers’ actions account for the bulk of U.S. economic activity.

Stock and bond prices rose on the news, partly because signs of economic weakness raise the chance that the Fed will trim interest rates at its next meeting.

The Fed cut short-term interest rates by half a point on Dec. 19--the second rate cut this year--to boost a sluggish economy. The economy is expected to grow at an anemic 2.7% in the first quarter of ‘96, down from the 4% growth rate of the period in ’95.

“This simply gives the Fed more ammunition to lower rates,” said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis.

The Conference Board survey found fewer Americans believing the economic environment is positive, fewer believing jobs are plentiful and fewer with plans to make major purchases such as cars or big household appliances.

Unemployment has hovered around 5.6% for most of the year, and the number of new jobs is half what it was in 1994. Last year, businesses added 300,000 new jobs a month.

“I don’t expect it to get much better in 1996,” Sohn said.

Job worries also may have deterred some would-be home buyers. Sales of previously owned homes dropped 1.7% last month for a second straight decline, according to the National Assn. of Realtors.

Sales totaled 4.04 million at a seasonally adjusted annual rate, down from 4.11 million in October and 4.15 million in September.

The association said consumers stayed out of the housing market partly because of the government shutdown.

But economists expressed doubt that the shutdown was a factor in depressed home sales, saying the market was simply in a lull. Some expected an improvement because mortgage rates are declining.

The Federal Home Loan Mortgage Corp. reported that 30-year fixed-rate mortgages averaged 7.38% in November, down from 7.48% the previous month and 9.16% a year earlier.

The monthly payment for a $100,000 mortgage with a 7.5% interest rate is $699; the payment on the same loan amount but with a 9% rate is $805.

“The housing market is torn between the crosscurrents of lower mortgage rates and a stalling economy. Home buyers are kind of treading water,” said David Levy of the Jerome Levy Economics Institute of Bard College in Annandale-On-Hudson, N.Y.

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Consumer Confidence

From a monthly survey of 5,000 U.S. households. Index: 1985=100

Dec. 1995: 98.7

Source: Conference Board

Existing Home Sales

Seasonally adjusted annual rate, in millions of units:

Nov. 1995: 4.04

Source: National Assn. of Realtors