U.S. consumers felt less upbeat in early May as persistently high gasoline prices and worries about the job market took their toll on confidence, a report said on Friday.

The University of Michigan (search) said its measure of consumer sentiment slipped to 85.3 so far this month from 87.7 in April, according to market sources who saw the subscription-only report.

Wall Street analysts had been predicting a slight gain to 88.0, partly because prices at the gasoline pump have come off their highs so far in May. The latest figures also revealed improvements in the job market over the past three months, which economists thought might have boosted confidence.

But that was apparently not enough to soothe consumers concerns about the future, with the survey's expectations component falling to 73.7 from 77.0. Ratings of current conditions also eased to 103.3 from 104.4.

"The higher expectations for the Michigan survey were based on the better numbers on the data front," said John Shin, economist at Lehman Brothers. "But more generally, the confidence numbers still reflect the elevated state of gas prices, which, while coming off, are still at uncomfortably higher levels."

Consumer spending (search) accounts for two-thirds of overall U.S. economic activity, and a deterioration in confidence is seen as a possible precursor to softer growth.

However, the correlation between sentiment and spending has weakened in recent years. In April, for instance, retail sales jumped 1.4 percent despite sliding confidence.

That increase in consumer activity, combined with an unforeseen narrowing of the March trade deficit, helped assuage fears among economic analysts that economic growth might be skidding off track and hitting a soft patch.

It also suggested the Federal Reserve (search) has plenty of room to keep raising interest rates, since it now looked like gross domestic product might perform a little better than expected in the second quarter, growing somewhere between 3-4 percent.

Financial markets had a very subdued reaction to the data, but the weakness was enough to leave some with nagging doubts about the economic outlook.

"We're not getting much extra traction," Steve Ricchiuto, chief U.S. economist at ABN Amro. "Labor markets are a bit stagnant based on the weekly indicators and chain store sales are soft."