By Adam Geller
The Associated Press

NEW YORK - A closely watched gauge of consumer sentiment rose in January, with Americans' increasing confidence in the economy tempered only by doubts about jobs, an industry group reported Tuesday.

The Conference Board said its consumer confidence index rose to 96.8, the highest level since mid-2002, following a dip in December to a revised reading of 91.7.

The rise in the index, while sizable, was smaller than the expectations of analysts, who had forecast a reading of 99.0.

"Growing optimism about the overall health of the economy continues to bolster consumers' short-term outlook," Lynn Franco, research director for the New York-based group, said. "But consumers' assessment of current conditions, which strongly hinges on improvements in the labor market, remains both weak and volatile."

The confidence reading is followed closely because consumer spending accounts for two-thirds of the economy. Consumers who feel more upbeat about the economy are likely to spend more, while those who remain pessimistic might curb their purchases.

Analysts called the January rise in the confidence measure encouraging, showing consumers see substantial evidence of economic improvement.

"They know things are getting better. They see it all around them," Joel Naroff of Naroff Economic Advisors in Holland, Pa., said. "Jobs are becoming more plentiful, but they're not as plentiful as they'd like them to be. That's the only thing at issue here."

The result is a gulf between consumer perceptions of the present and the future. That is not unusual, but is more typical of turning points in the economy rather than the current state, where most measures show an economy that is expanding robustly, Naroff said.

The Conference Board's monthly index reflects consumer perceptions of the current economy as well as their outlook for the next six months.

In January, a sub-index measuring consumers' assessment of current conditions rose to 80.0 from 74.3 in December. Those describing the present business climate as good rose to 22.0 percent, up from 18.6 percent in the previous month.

But that was tempered by lingering doubts about jobs. Those who said jobs are hard to get declined to 31.4 percent from 32.4 percent. But the number who said jobs are plentiful slipped to 12.4 percent from 12.6 percent.