U.S. consumers expect steep unemployment rise: survey

NEW YORK (Reuters) - U.S. consumers expect the unemployment rate to rise steeply in a prolonged recession, and as a result have slashed spending plans, according to a survey released on Friday.

Consumers expect the unemployment rate to top 8.5 percent by the end of 2009, which is consistent with a dip in total personal consumption expenditures of 1 percent next year, the Reuters/University of Michigan Surveys of Consumers said.

Only one prior such survey, in mid-1980, showed a marginally larger proportion of consumers expected a rising unemployment rate, the Reuters/University of Michigan Surveys of Consumers said.

"Although consumers began voicing their concerns about rising unemployment in early 2007, fears of rising joblessness spread more rapidly in recent months as consumers became convinced that the recession will be deeper and last longer than they had initially anticipated," survey director Richard Curtin wrote in the report.

The survey showed seven in ten consumers expected the unemployment rate to increase during the year ahead.

A Labor Department report released earlier this month showed national unemployment shot up to 6.5 percent in October, marking the highest since March 1994.

(Reporting by Chris Reese, Editing by Chizu Nomiyama)