Saul Loeb / AFP - Getty Images

Federal Reserve Board Chairman Ben Bernanke speaks at a press conference Wednesday.

Rather than doing nothing, the Federal Reserve decided Wednesday to do as little as it possibly could.

The Fed’s decision to extend its “Operation Twist” economic stimulus program represents the path of least resistance for a central bank contemplating a raft of economic troubles, including a financial crisis in Europe and a weakening U.S. economy, analysts say.

At the conclusion of its two-day policy meeting, the Fed said it will prolong the program until the end of the year. The $400 billion program was launched last fall and was due to expire later this month. The extension adds another $267 billion, according to the Fed.

At a press conference Wednesday afternoon, Fed Chairman Ben Bernanke said that there has been a great deal of new developments since the Fed’s last meeting in April and that a lot of the incoming data were “disappointing.” He added that while the step the Fed has taken is substantive, further quantitative easing is still on the table, if needed.

When pressed by reporters why the Fed hadn’t done more to stimulate the economy, particularly in light of the Fed’s reduction of its growth outlook Wednesday, Bernanke said additional asset purchases “would be something we would consider if we need to take further steps to help the economy.”

Many analysts had expected the Fed to announce something to signal to the markets that it is willing to provide further support to the economy. In its policy statement the Fed didn't adjust interest rates, but said that growth in employment has slowed recently and unemployment remains elevated.

The “Operation Twist” program adjusts the composition of the government bonds held by the Fed by swapping short-term assets for longer-term assets. The idea is to push down long-term interest rates, making it easier for businesses and consumers to get credit, supporting the recovery.

Operation Twist is likely to have a limited impact on the economy at this point, analysts say. The Fed had been painted into a corner last week, however, when the stock market rallied strongly on the expectation that central banks around the world would provide more stimulus in the event of a Greek exit from the eurozone following a crucial election last weekend.

Related: Fed extends 'Operation Twist,' says hiring has slowed

“This is the minimum the market would accept,” said J.J. Kinahan, TD Ameritrade’s chief derivatives strategist. He said the Greek election, which eased fears of an imminent financial disaster in the eurozone by handing victory to a party that supports Greece staying in the currency union, meant the Fed didn’t have to do anything more radical to boost the economy.

“They had to do something, and by extending Operation Twist they’ve given the markets confidence that they are ever watchful,” he said. “They maintained the status quo in a way that the market would be comfortable with.”

“And to their credit they kept their power dry,” he continued. “It’s not like this Greek election has solved the problems in Europe. They kept themselves in a position of reacting in case of worse news from Spain or Italy.”

Recent reports, including two straight months of weak job growth, suggest economic growth is slowing again after a tepid recovery. The Fed reiterated its plan Wednesday to hold down rates until late 2014 to sustain the recovery, and in testimony earlier this month Bernanke said the Fed is ready to act if needed.

Others had hoped for something stronger from the Fed, such as another massive bond-buying program known as “quantitative easing,” or QE, in which the Fed essentially prints money to buy long-term mortgage or Treasury bonds.

That would be controversial because past efforts have had a questionable success rate, and it brings with it the risk of inflation down the road because it increases the money supply. Also, economists say the Fed is likely to want to keep something in its arsenal in case the economic outlook worsens over the summer.

The Fed is likely to want to hold some of its arsenal in reserve. Earlier this month, Bernanke told Congress it must take decisive steps to repair U.S. policies on taxes and government spending, noting that tax increases and government spending cuts that are supposed to start in 2013 -- also known as the “fiscal cliff” -- could push America into recession if they are not addressed.

“It’s still a bit early, but as we move forward in the year we do anticipate seeing some effects,” Bernanke told reporters Wednesday. The effects will hurt employment in many localities and states and affect the pace of growth in the overall economy, leading to slower economic growth, he added.

The ongoing financial crisis in Europe is another potential problem for the U.S. economy, Bernanke said.

“We are hoping that European policymakers will take the additional steps they need to take to stabilize the situation but we are prepared in case things get worse to protect the U.S. economy and the U.S. financial system,” he said.

With major events in Europe looming, including a European Union summit in late June and a meeting of the European Central Bank in early July, the Fed is likely to want to keep something up its sleeve, said former Fed governor Larry Meyer.

“If things get really bad, then I believe we will see coordinated central bank action, and I think the Fed wants to be able to do as much as possible, consistent with what other central banks are doing,” Meyer said.

Peter Fisher, head of investment manager BlackRock’s global fixed income portfolio worth $1.2 trillion, said it would have been better for the Fed to hold fire Wednesday.

“I don’t think either twist or balance sheet expansion has much more room to be effective here,” he told CNBC. “If they keep taking long-term treasuries out of the market, they’re denying the banking system the best collateral in the banking system, and that doesn’t provide credit.”

“Monetary policy works though changing our expectations, so they’ve got o shock us; do something we don’t expect,” he said.

Randall Kroszner, a professor at The University of Chicago’s Booth School of Business and a former Fed governor, told CNBC that the Operation Twist asset-purchase program is likely to have a limited impact on the economy, and particularly on housing -- the biggest drag on the recovery.

“I think the Fed has done almost all it possibly can do,” Kroszner said. “It really has to be other polices that try to get the housing market moving.”

In a statement Wednesday, the Fed shaved its forecast for economic growth in 2012, projecting that the economy would grow at a range of 1.9 percent to 2.4 percent, down from an April projection of 2.4 percent to 2.9 percent. It also cut forecasts for 2013 and 2014.

As for unemployment, the Fed said it now expects the jobless rate to stick around 8 percent for the rest of this year.

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A survey of chief executives shows fewer large U.S. companies plan to hire or boost spending in the next six months, reflecting a weaker U.S. economy.

The Business Roundtable says 36 percent of its CEO members plan to add workers over the next six months. That's down from 42 percent when the survey was last taken three months ago.

Jim McNerney, the group's chairman and CEO of The Boeing Co., blamed the dip in sentiment on "concern over increasingly persistent obstacles to a stronger recovery." Those include uncertainty over potential U.S. tax increases and spending cuts early next year and Europe's financial crisis.

Only 43 percent say they plan to step up spending on machinery, computers and other large goods, down from 48 percent. Most CEOs still expect sales to increase in the next six months.

Overall, the CEO Outlook survey index fell to 89.1 in the second quarter, down from 96.9 in the first three months of the year. Any reading above 50 indicates growth.

The gloomier outlook follows a sharp pullback in hiring over the past two months, which has raised concerns that the economy is slumping after a fast start. Job growth averaged only 73,000 in April and May, after average gains of 226,000 per month in the first three months of the year. The unemployment rate rose to 8.2 percent in May from 8.1 percent.

McNerney said that companies are delaying hiring, and even laying off workers, in anticipation of what many economists call the "fiscal cliff" that looms at the end of this year. Several large tax cuts are scheduled to expire and big spending cuts, including in defense, are set to take effect Jan. 1.

While President Barack Obama and lawmakers say they will delay the onset of the changes, McNerney said companies can't be sure. Last year, Congress and the White House agreed only at the last minute to raise the government's borrowing limit and stave off a possible default.

"We have yet to regain faith that the process will deal with it," McNerney said.

As a result, "we don't know how corporations, or individuals, or capital will be taxed," he said. "That is having an impact on the results you see here."

Boeing and many other aerospace companies with government contracts are holding back on hiring and are cutting jobs in anticipation of the spending cuts, he added. 

Europe: The big worry
Europe's woes are of far more concern than slowing growth in China, McNerney said. About a quarter of U.S. exports go to Europe, Roundtable officials said.

"The European situation could decelerate quickly," McNerney told reporters on a conference call. "We hope it doesn't, but I think it has a greater possibility to decelerate quickly, whereas China is more a matter of having 6 percent growth as opposed to 9 percent growth for a while."

Europe's sovereign debt crisis stands as one of the greatest current risks to the world economy. While investors breathed a sigh of relief after this weekend's elections in Greece, which lowered the risk that the heavily indebted country would pull out of the euro currency bloc, concerns are now rising that Spain, the zone's fourth-largest economy, would need an international bailout.

Political deadlock in Washington ahead of the November elections also worries U.S. CEOs, particularly those in the defense industry bracing for $500 billion in automatic additional spending cuts later this year if Congress fails to reach an agreement on other savings and revenues.

That and uncertainty on how U.S. tax policies could change in the coming months has CEOs wary of hiring or committing to large new capital investments, McNerney said.

"Companies are holding back," he said.

CEOs cut their forecast of overall growth in the U.S. economy and now look for a 2.1 percent rise in gross domestic product, versus the 2.3 percent forecast in March.

The survey of 164 CEOs was conducted from May 17 through June 8. Business Roundtable member companies generate $6 trillion in annual revenues and employ more than 14 million people.

The Associated Press and Reuters contributed to this report.

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Confronted with a stumbling U.S. recovery and a financial crisis in Europe, the Federal Reserve decided Wednesday that it would extend a program known as "Operation Twist" aimed at pushing down long-term interest rates and boosting the economy.

The Fed said in a statement that while the economy has been expanding modestly throughout the year, growth in employment has slowed recently and unemployment remains elevated.

It said it expects economic growth to continue to grow moderately over coming quarters and then to pick up gradually. "Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate," the statement said. It shaved its forecast for economic growth in 2012, projecting that GDP would grow at a 2.4 percent rate max rather than the 2.9 percent pace it predicted in April.

As for unemployment, it now expects the jobless rate to stick around the 8.0 to 8.2 percent range, from 8.2 percent now and its April projection of around 7.8 to 8.0 percent.

The Fed also voted to keep interest rates unchanged at historic lows at least until the end of 2014.

Its assessment of the economy appeared slightly more negative than its previous outlook in April. For example, it pointed out that the pace of household spending seems to have slowed and that the housing sector remains depressed, despite some recent signs of improvement.

It also took pains to mention the situation in Europe, where eurozone officials are struggling to contain a debt crisis that threatens to engulf the continent and slow economies throughout the world, including the U.S. "Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook," the Fed said in its statement.

Given all that, the Fed said it would continue through the end of year to sell short-term securities and buy longer-term bonds to push down long-term interest rates. That strategy, known popularly as Operation Twist, originally was meant to end soon.

The Fed did not decide to provide the economy with what some felt would be stronger medicine by performing another massive round of bond buying, known as quantitative easing, and expanding its portfolio of assets. But Federal Reserve Chairman Ben Bernanke said in a news conference that the Fed was ready to do more to help the economy, if needed.

Story: Federal Reserve takes path of least resistance

"The Fed move to extend the Operation Twist program is conservative and wary. The central bank is signaling its concern for the economic future, both American and European, without unduly damaging the present by weakening the dollar," Worldwide Markets Chief Market Strategist Joseph Trevisani told Reuters.

Rick Bowmer / AP

People wait in a line at a job fair in Oregon. Government data showed that jobs openings dropped to a five-month low in April.

Job openings declined in April to a five-month low, according to government data released Tuesday, as employers wrestled with worries about the European financial crisis, government deadlock in Washington and other data showing the recovery stumbling.

The Labor Department reported that there were 3.4 million jobs openings on the last day of April, down from 3.7 million in March. The drop was across many industries and professions.

"Job openings decreased for total nonfarm, total private, and government as well as in manufacturing, professional and
business services, and state and local government," The Labor Department said in a statement.

Given that there were 12.5 million Americans unemployed in April, that would mean 3.7 job-seekers for each opening that month, versus 3.4 for each opening in March.  

Tony Gutierrez / AP

Jeff Raymond, left, with Ari-Tex Electric Inc., prepares to install lighting in a Hawkins-Welwood Homes luxry townhome site Wednesday, May 16, 2012, in Plano, Texas.

Construction companies broke ground on fewer privately-owned homes in May, but permits to begin construction jumped, raising hopes that the housing market's recovery was still rolling along.

The Commerce Department reported Tuesday that housing starts dropped 4.8 percent last month to a seasonally-adjusted rate of 708,000. Single-family housing starts rose 3.2 percent, but multi-family home starts dropped 21.3 percent.

Permits for future construction rose 7.9 percent last month, however, to the highest since September 2008 when the nation was in the depths of the worst housing crisis since the Great Depression.

The data came a day after a report from home builders showing that their industry is feeling the most upbeat in five years.

The NAHB/Wells Fargo Housing Market index rose one point from the month before to 29, in another sign that the housing market may be slowly heading into recovery, and one point ahead of the expectations of economists polled by Reuters. May's reading was previously reported as 29.

It also comes as the Federal Reserve begins a two-day meeting to weigh the state of the entire economy and whether the central bank should act to help revive what seems to be a flagging recovery. Despite the drop in May's numbers after a big rise i n April, the housing market could prove to be a bright spot in the Fed's outlook.

"A disappointing headline number on the housing starts that looks to be partially offset by a much higher than expected permits number for April. So on balance, the numbers are a push, one cancels out the other. In the broader scheme of things, this housing data will get lost ahead of the Fed meeting today and tomorrow," Commonwealth Foreign Exchange chief market analyst Omer Esiner told Reuters.

Win Mcnamee / Getty Images

Fed Chairman Ben Bernanke testifies before the Joint Economic Committee on Capitol Hill earlier this month.

With the dark cloud of Europe’s ongoing financial crisis still hanging over the world financial system, the Federal Reserve opened a two-day meeting Tuesday with speculation swirling that policymakers could announce more stimulus to boost the U.S. economy.

A crucial Greek election over the weekend eased fears of an imminent financial disaster in the eurozone by handing victory to New Democracy, a center-right party that supports Greece staying in the currency union. That means, for now at least, investors can stop worrying about the market chaos that would follow a Greek decision to leave the eurozone.

Now the focus shifts to the Fed and how it might play its next hand.

Recent reports, including two straight months of weak job growth, suggest economic growth is slowing again after a tepid recovery. That sets the stage for Fed Chairman Ben Bernanke to ask central bankers to approve more stimulus, although the options are limited. In testimony this month Bernanke said the Fed stands ready to act if needed.

Opinions are divided over what the Fed will do.

Some economists expect policymakers to extend “Operation Twist,” a program launched last fall that adjusts the composition of the government bonds held by the Fed by swapping short-term assets for longer-term assets. The idea is to push down long-term interest rates, making it easier for businesses and consumers to get credit. The program is due to end June 30, although the Fed could opt to extend it beyond that date.

Others are hoping for something stronger, such as another massive bond-buying program known as “quantitative easing,” or QE, in which the Fed essentially prints money to buy long-term mortgage or Treasury bonds.

That would be controversial because past efforts have had a questionable success rate, and it brings with it the risk of inflation down the road because it increases the money supply. Also, economists say the Fed is likely to want to keep something in its arsenal in case the economic outlook worsens further over the summer.

An extension of “Operation Twist” is the most likely first step, according to Former Richmond Fed President Al Broaddus.

“I think if there’s a significant risk, and action is needed, they may need to do something this week,” Broaddus told CNBC. “My guess is it will be some kind of modification of Operation Twist.”

He said the focus of the meeting would be domestic U.S. conditions with some discussion of the eurozone crisis.

Barclays Capital strategists Alan James and Edmund Shing are also expecting an extension to the Fed’s Operation Twist, pointing to weakness in manufacturing output and in consumer sentiment.

“The soft patch in U.S. economic data keeps getting larger,” they wrote in a research note Monday.

One of the only other options open to the Fed is to adjust interest rates, which are already at record-low levels near zero. In January the Fed said it plans to hold down rates until late 2014 to sustain the economic recovery. The Fed would now have to signal to the market that it plans to hold rates down even further into the future.

The worsening debt crisis in Europe and fears over whether Congress will hold off on tax increases and government spending cuts that are supposed to start in 2013 -- also known as the “fiscal cliff” -- are weighing on consumer and business confidence.

Signs that Europe’s woes, which investors fear will have negative repercussions on the U.S. economy, are far from over were seen Monday when Spanish borrowing costs soared, with 10-year bond yields hitting 7.30 percent -- the highest in the eurozone’s history and above the rate that has forced other struggling euro-area nations to seek an international bailout.

Still, the troubles in Europe shouldn’t factor too heavily in the Fed’s plans this week, said Dino Kos, a former New York Fed executive vice president. Weakness in Europe should already be factored into the Fed’s forecast, he told CNBC.

“It shouldn’t really affect their thinking, although the situation has obviously gotten worse,” he said. “The way it should impact their thinking is does the European slowdown affect U.S. growth, and does the growth then come down to such a degree that they need to counter it?”

Kos said the best position for the Fed this week would be to hold fire, given the potential negative consequences of the fiscal cliff.

“Do you want the Federal Reserve to have something in reserve?” he said, noting that there are many uncertainties surrounding the fiscal cliff, given its timing, and the uncertainties about what the political situation will be at the end of the year.

“I would say they should wait,” he said.

Reuters contributed to this report.

AFP - Getty Images

German Chancellor Angela Merkel speaks with members of her delegation before a session of the G20 Summit in Los Cabos, Mexico on Monday. Increasingly isolated on the world stage, Merkel faces waning popular support at home for further German-led bailouts of other euro zone nations.

WEIMAR, Germany -- Time is running out for Angela Merkel.

The German chancellor -- Europe’s last, best hope for staving off financial and economic ruin -- is running out of options to save the euro zone’s common currency.

Sunday’s cliffhanger Greek elections may have postponed Athens’ departure from the common currency, along with the risk of a wider euro zone recession that would threaten Germany’s export-reliant economy. But Athens has yet to form a new government willing to accede to Germany’s demands for continued, painful spending cuts.

"We want Europe, we want to cooperate," said Filippos Nikolopoulos, a sociology professor at Crete University. "But we do not want to be subjugated by Mrs. Merkel." 

In 18 summit meetings over two years, European leaders have tried and failed to agree on a way out of the debt crisis. Now, Greece has little time to form a new government. With a shrinking cash balance leaving Athens days away from issuing IOUs to government workers, the so-called  troika of bailout agencies– the IMF,  EU and European Central Banks - are refusing to send a new mission to Greece until it’s clear who they will be negotiating with.

Even if a government can be formed, the political divisions that have brought Greece to the brink of economic collapse remain deeply entrenched.

“There is significant risk that this government, if formed, will be weak and short-lived,” said David Rosenberg, chief economist at Gluskin Sheff. “Lacking is the deep popular support needed to usher in critical legislation. Instead, we can probably look forward to policy paralysis.”

Merkel not only faces continued resentment among Greeks but is also losing support among her own voters, especially for her plan to bind Europe more closely in a common political union that would require Germans to cede sovereignty to Brussels and turn over more power to the European Parliament.

John Schoen / msnbc.com

German student Mara Loth is opposed to proposals that would tighten the European union.

“I feel more secure living in a smaller country with its own government,” said Mara Loth, an architecture student at Bauhaus University. “I think if Europe were like the U.S. -- if all the states were put together -- I wouldn’t even understand my president because he would talk another language. So I really, really hope this doesn't happen.”

German prides runs high here in the town that gave its name to a democratic regime that ruled between world wars until it was undone -- largely by economic turmoil. While cable news channels are devoting heavy coverage to Merkel’s negotiations with world leaders at the G20 summit meeting in Mexico, most TV screens stay tuned to the latest round of the Euro 2012 soccer championship, in which Germany remains a strong contender.

PhotoBlog: World leaders pose for family picture at G20 summit

Merkel finds herself increasingly isolated in her quest to save Europe by prescribing harsh medicine to southern neighbors that include the kind of of spending cuts and labor reforms that helped revive Germany’s moribund economy a decade ago.

For a time, Merkel enjoyed the support of her neighbor, former French President Nicolas Sarkosy, who lent the support of Europe’s second-largest economy to demands for fiscal austerity in Greece, Ireland, Portugal, Spain and Italy. But Sarkozy's recent loss to socialist François Hollande, who campaigned on a promise to reverse the tightfisted policies of his predecessor, has left Merkel with just a handful of smaller northern European allies. Merkel’s austerity roadmap was further eroded Sunday when French voters strengthened their support for Hollande’s new government.

Burdened by the history of two world wars fought over its former leaders' imperial ambitions, Germans are deeply averse to calls that they assume an even larger role in reversing Europe's deepening political divide and widening financial crisis. Such calls have come in recent weeks President Barack Obama, Hollande, British Prime Minister David Cameron and Italian Prime Minister Mario Monti, among others.

Merkel has steadfastly resisted proposals for new measures such as a bank union to guarantee deposits, a debt repayment fund to free up frozen credit markets, and the pooling of borrowing among euro zone members through the creation of a common euro bond. Some economists warn that unless Merkel supports such measures, the unwinding of the euro zone will accelerate.

Germany is not unsympathetic to the plight of its struggling southern neighbors. The Berlin government has already contributed the bulk of the nearly 700 billion euros ($900 billion) raised for various bailout funds and guarantees. With demand for its exports already beginning to soften, many German workers clearly understand the threat of a widening recession outside German borders. 

But so far, the euro crisis, for most Germans, is still contained largely to newspaper headlines and TV reports. Increasingly isolated on the world stage, Merkel faces waning popular support at home for further bailouts. Though Germans support the preservation of the common currency that helped boost their export economy, opinion polls show opposition to further bailouts running about two to one.

And there is little appetite for Merkel’s plan for a United Europe.

“Even though Germany has economic problems, it is one of the leading countries in Europe,” said Loth, the Bauhaus student. “That’s why I feel like I’m in a good position living in Germany right compared to other European countries. I understand why, and I understand that countries having bigger economic problems need to be supported and I understand that they need help too. But I think uniting Europe is not going to solve that problem."

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Pew Center on the States

A pension plan is considered healthy if it is 80 percent funded. A new Pew report finds many are not.

State governments face a gap of more than $1 trillion between what they say they will provide public workers in retirement benefits and what they actually have in their coffers, according to a study released Monday.

The report, from Pew Center on the States, finds that the gap has widened considerably in recent years, as states have been slammed by investment losses stemming from the 2008 financial crisis and budget crunches caused by the recession.

As of the 2010 fiscal year, the study found that states have about $757 billion less than they need for pension obligations. The states have about $2.31 trillion set aside, the report found, but their liability is about $3.07 trillion.

In addition, the report found that states have a health care liability of about $660 billion, but have set aside only $33.1 billion for those benefits. That leaves a $627 billion gap.

The two shortfalls add up to $1.38 trillion for the 2010 fiscal year, the most recent data available. That’s an increase of $120 billion, or 9 percent, from the 2009 fiscal year.

Some say even those massive estimates fall woefully short. Josh Rauh, associate professor of finance at Northwestern University's Kellogg School of Management, estimates that states are facing a shortfall of $4.4 trillion for pension obligations alone.

Rauh said that's because most states forecast on the assumption their investments will yield an 8 percent return. As anyone who's watched their 401(k) accounts rise and fall over the past 10 years knows, that's hardly guaranteed.

"That is simply not a valid way to do financial accounting," Rauh said.

David Draine, a senior researcher with Pew Center on the States, said the financial crisis and recession have played a big role in creating the shortfall, but he noted that the problem began before that.

“Many of these states also failed to make recommended contributions when times were good,” he said.

Draine compared the situation to a person who owes a lot in credit card debt but is only making the minimum payments, if that. That can work for a while, but the balance keeps growing.

That’s how it is with many states right now. They have enough money to pay their current retiree benefits but not necessarily those due in the future.

Generally speaking, a healthy pension fund should be 80 percent funded. The report found that 34 states were below that threshold in fiscal 2010, up significantly from 22 states just two years earlier.

The states in the worst shape as of 2010 include Connecticut, Illinois, Kentucky and Rhode Island. The states in the best shape include North Carolina, South Dakota, Washington and Wisconsin.

Many states are completely unprepared to pay for future retiree health care benefits. The report found that 17 states have not set aside any money for that.

Richard Kaplan, a law professor at the University of Illinois who has studied this issue extensively, said it’s common for states to have set aside little or no money for retiree health care.

That’s partly because they aren’t obligated to, and partly because it’s very difficult to anticipate what an employee’s health care needs might be, let alone what it will cost.

Kaplan said most states have a legal or contractual obligation to make pension payments. But there are far fewer safeguards when it comes to health benefits.

“There is really nothing that is stopping a state or local government from saying this is too expensive or we’re not going to cover this anymore,” Kaplan said.

Many states are taking action to deal with these budget shortfalls. The Pew report, citing the National Conference of State Legislatures, said 43 states made benefit cuts, increased  employee contributions or both between 2009 and 2011.

Rhode Island has been among the most aggressive, with a plan to cut benefits for both current and future retirees.

Rauh, the Kellogg professor, said many state and local governments are pushing to reduce or dismiss cost of living adjustments for retirees as a way to curb costs.

He said those changes have seemed more palatable than more aggressive changes, such as moving public employees into the types of plans that most private employers now use, which are largely driven by personal investments. There's plenty of evidence that many Americans have not done enough to save for retirement on their own using such plans. 

"(The) 401(k) plans in the private sector have not exactly been a resounding success," he said.

U.S. consumer sentiment fell in early June to a six-month low on worries about deterioration in the jobs market and Europe's festering debt crisis, a survey released on Friday showed.

Americans downgraded their economic outlook after their confidence improved in May to its highest level since October 2007.

"It's more convincing evidence that the economy is stuck in low gear. We've had a steady stream of negative data that increases pressure on the Fed to do more," said Joe Manimbo, Travelex market analyst.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment fell to 74.1 in June from to 79.3 in May, falling short of the 77.5 reading predicted by economists recently polled by Reuters.

This was the weakest reading since 69.9 in December.

"Income losses were reported by nearly one-third of all households in early June and the news reaching consumers about job prospects turned negative for the first time since late 2011," survey director Richard Curtin said in a statement.

"In addition, a small but rising number of consumers reported their concerns about the fallout from Europe, the most that mentioned the potential domestic impact from an international crisis since the Asian flu in 1998," he said.

Consumer sentiment is seen as a predictor of consumer spending, which accounts for roughly two-thirds of the U.S. economy.

There has been data pointing to a pullback in spending. On Wednesday, the government reported retail sales fell for a second straight month after steady growth in the first quarter.

Renewed concerns about jobs and problems in Europe undermined consumers' current and future outlook on the economy.

The survey's barometer of current economic conditions fell to 82.1 in early June, the lowest level in six months and below the 85.3 figure predicted by analysts. It stood at 87.2 at the end of May, which was the highest since January 2008.

The survey's gauge of consumer expectations declined to 68.9 in early June, the lowest since December and falling short of a median forecast of 71.8. It was 74.3 at the end of May, which was the highest since July 2007.

This less optimistic outlook in early June coupled with a drop in the likelihood that families will buy cars, refrigerators and other big-ticket items, the survey showed.

Its index on buying conditions for durables fell to 125, matching the level seen in March, from 132 in May.

The survey's one-year inflation expectation among consumers was unchanged at 3.0 percent, but its five-to-10-year inflation outlook rebounded to 2.9 percent in early June after falling to 2.7 percent in May.