The absence of job growth in the expanding economy is holding back consumer confidence. The economy is trying to replace about 8 million jobs lost during the recession as the unemployment rate remains at 9.4 percent.
"Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit," the Federal Open Market Committee said on Wednesday.
The post-holiday sentiment about whether it's time to buy big-ticket items such as automobiles dropped to 81.8 from 85.3 in December.
Longer-term sentiment improved as consumer expectations for the six months ahead rose to 69.3, the highest level since June, from 67.5, the report showed.
That number could be further boosted if businesses pick up the pace of hiring in the next six months, as they've said they intend to do.
The White House and Congress are hoping for a bounce in job creation from the $858 billion comprehensive tax bill that extended the 2001 and 2003 tax cuts for two years and provided for federal emergency unemployment benefits through the end of this year.
"These steps, taken by Democrats and Republicans, will grow the economy and add to the more than 1 million private-sector jobs created last year," President Obama said Tuesday in the State of the Union address.