U.S. consumer sentiment declines/ falling consumer confidence/ American consumers’ job worries/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. consumer confidence fell sharply in September, with the Conference Board’s index dropping to 98.7 from 105.6 in August. Concerns over the weakening job market drove the decline, marking the largest month-to-month drop since 2021. The Federal Reserve’s recent interest rate cut reflects its efforts to stabilize a softening labor market.
U.S. Consumer Confidence Declines Quick Look:
- Consumer confidence index falls to 98.7 in September, down from 105.6 in August.
- Biggest decline since August 2021, driven by job market concerns.
- Short-term expectations for income and employment also dropped significantly.
- The Federal Reserve recently cut interest rates by 0.5% to support the labor market.
- Consumer spending remains crucial, accounting for 70% of U.S. economic activity.
U.S. Consumer Confidence Drops Amid Job Market Concerns
Deep Look:
American consumers are growing increasingly worried about the job market, leading to a significant drop in confidence this September. The Conference Board’s consumer confidence index fell to 98.7 from 105.6 in August, marking the largest decline in over two years. The survey, conducted before the Federal Reserve’s surprise half-point interest rate cut last week, highlights growing anxiety about job security as the labor market shows signs of slowing.
The consumer confidence index gauges Americans’ assessments of current economic conditions and their expectations for the coming six months. The drop in confidence was driven by worsening perceptions of business conditions and a more pessimistic outlook on the labor market. The short-term expectations index, which measures Americans’ projections for income, business, and job prospects, fell to 81.7 from 86.3 in August. Notably, a reading below 80 often signals the potential for a near-term recession.
“Consumers’ assessments of current business conditions turned negative, while views of the current labor market situation softened further,” said Dana Peterson, chief economist at the Conference Board. She added that consumers are increasingly pessimistic about future job prospects.
Job Market Woes The labor market, which had been a pillar of economic strength, has weakened in recent months. Employers added a modest 142,000 jobs in August, a slight improvement from July’s gain of 89,000, but well below the numbers seen earlier in the year. The unemployment rate ticked down slightly to 4.2%, though it remains near its highest level in almost three years. Revisions to hiring data for June and July also showed that 86,000 fewer jobs were created than initially reported, further evidence of a slowdown.
Additionally, a recent government report revealed that the U.S. economy added 818,000 fewer jobs between April 2023 and March 2024 than previously estimated. This sharp downward revision has raised concerns about the overall strength of the labor market and its ability to sustain economic momentum.
Federal Reserve Rate Cut In response to the softening labor market and easing inflation, the Federal Reserve made a significant policy shift last week by cutting its benchmark interest rate by 0.5%, double the usual amount. This marked the Fed’s first rate cut in more than four years and brought the central bank’s key rate down to around 4.8%. For over a year, the Fed had maintained high rates in an effort to tame the worst inflationary streak in four decades.
Now, with inflation cooling to 2.5% in August—down from a peak of 9.1% in mid-2022—Fed policymakers have shifted their focus toward supporting job growth. The rate cut is aimed at providing relief to businesses and consumers alike, with further reductions expected in the months ahead. The Fed signaled that additional rate cuts are likely at its final two meetings of 2024, with further cuts anticipated in 2025 and 2026.
Consumer Spending’s Role Consumer confidence is closely watched because consumer spending accounts for nearly 70% of U.S. economic activity. A drop in confidence could signal a pullback in spending, which would pose a challenge to an economy already grappling with weaker job growth. As concerns about the job market grow, economists will be monitoring whether consumers continue to spend at current levels or begin to scale back.
The Conference Board also reported that Americans’ views of current conditions declined, with that index falling to 124.3 in September from 134.3 the previous month. The continued weakening in consumer sentiment underscores the challenges ahead for the U.S. economy as it navigates a cooling labor market and lingering uncertainties.
