U.S. Consumer Confidence Slips in September on Job Fears
Concerns about jobs and business conditions are driving American consumers to feel less optimistic about the economy this month. Consumer confidence fell sharply in September, the biggest decrease in more than two years, a report published by The Conference Board showed.
Consumer Confidence Index Drops Sharply
The Conference Board’s Consumer Confidence Index decreased to 98.7 from 105.6 in August. This is the biggest one-month decline in the US index since August 2021 and suggests consumers grew more downbeat about both how things are right now economically and the current state of employment conditions. According to Dana Peterson, the chief economist at The Conference Board, all five of the components tracked worsened this month.
This poll was taken prior to the Federal Reserve announcing its half point interest rate cut last week as it seeks to calm fears in a weakening labor market.
Worries About the Job Market Are Increasing
A weaker job market is also one of the chief reasons for the falling consumer confidence. Over August, employers tacked on 142,000 jobs after adding only 89,000 in July—an indicator of decelerating job creation. The jobless rate also slipped a tad lower to 4.2% from 4.3%.
The survey found that a measure of their perspective on current business conditions turned unfavorable and also the view of job market eased. The share of people who said jobs are “plentiful” declined from 32.7% in August to 30.9% in September. Meanwhile, those who say jobs are “hard to get” rose to 18.3% from 16.8%.
Short-Term Expectations Fall
A measure of short-term expectations for income, business and labor conditions tumbled to 81.7 in September from 86.3 the prior month as well. The drop of this number below 80 is often predicted recession. The Atlanta Fed said a broader measure of consumer sentiment tumbled in February.
Today’s decline in claims also follows a correction to an earlier jobs report from this year that showed 818,000 fewer jobs were created between April 2023 and March 2024 than initially reported. The minutes added to evidence that the labor market is losing steam.
Inflation Remains a Concern
Consumers continue to worry about inflation, but it has moderated from its mid-2022 highs. Two-month change in the inflation rate: +0.2% Inflation of 9.1% a year, a record low The economic recovery continued to strengthen July,A Read More → But consumers remain concerned about rising prices and inflation expectations over the coming year rose to 5.2%, topping the list of worries for shoppers.
The Federal Reserve has responded to this economic pressure by lowering its benchmark for the first time in more than four years, slashing it 50 basis points to 4.8% from as high as 5.3%. The Fed’s first rate cut in more than four years, was designed to cushion a softening job market and rein in inflation.
Outlook for the Future
The drop in consumer confidence and the signs of strain in the job market have left many Americans unsure about what lies ahead. Even though the Fed signaled more rate cuts through 2024, how these will affect consumer confidence and economic stability remains to be seen.
The latest findings from the Conference Board pointed to concerns about the direction of the economy among consumers, though they fell well short of indicating that a recession was around the corner, with increased worries related to jobs and inflation.
Conclusion
The U.S. economy is entering some turbulence as consumer confidence wanes and job market fears rise. But given inflation still in focus for consumers and with headwinds building around the labor market, businesses and policymakers need to tread warily if the economy is to avoid toppling into recession.