Us Consumer Confidence Plummets Amid Increasing Worries About Job Security

The U.S. consumer confidence index experienced a significant decline in September due to growing concerns over job security and a weakening labor market. According to the Conference Board’s report on September 24, the consumer confidence index dropped to 98.7, down from a revised 105.6 in August, representing the sharpest decrease in over three years.

All five components of this month’s index, including current business and employment conditions, future business and job market expectations, and income outlook, witnessed a deterioration, indicating widespread consumer pessimism.

Dana Peterson, the chief economist at The Conference Board, stated, “Consumers’ assessments of current business conditions turned negative, while views of the labor market situation softened even further. Consumers also expressed more pessimism about future labor market conditions and less positivity regarding future business conditions and income.”

In September, consumers’ concerns primarily revolved around the labor market. The present situation index, which measures current business and labor conditions, declined by 10.3 points to 124.3. The expectations index, which gauges consumer sentiment about short-term income, business, and job prospects, fell by 4.6 points to 81.7, narrowly staying above the critical 80 threshold that often signals an upcoming recession.

Peterson explained the deterioration across the index’s main components, stating, “[Consumers’] concerns about the labor market and reactions to fewer hours, slower payroll increases, and fewer job openings likely played a role. However, it is important to note that the labor market remains quite healthy with low unemployment rates, few layoffs, and rising wages.”

The steepest decline in confidence was observed among consumers aged 35 to 54, who are typically in their peak earning years and more sensitive to labor market shifts. Confidence also declined across income groups, particularly among households earning less than $50,000 annually.

Furthermore, the S&P Global Manufacturing PMI, which indicates factory activity, dropped to 47.0, the lowest level in 15 months. This reading suggests that factory activity is shrinking at an accelerated pace. The labor market in the manufacturing sector also exhibited signs of strain, with job losses increasing at the fastest rate in over 14 years, excluding the period during the COVID-19 pandemic.

The Conference Board’s latest sentiment report revealed that fewer respondents expressed confidence in their families’ financial situations in September compared to the previous month. Plans for major purchases, such as appliances, smartphones, and laptops, decreased, although there was a slight increase in intentions to buy homes and cars.

The report also indicated that the risk of a recession weighed more heavily on consumers’ minds in September. While the proportion of consumers anticipating a recession over the next 12 months remained low, there was a slight uptick in the percentage of consumers believing the economy was already in a recession.

Commenting on the significant drop in consumer confidence, Jamie Cox, managing partner for Harris Financial Group, said, “It is never good to see consumer confidence decline so much. Consumers are clearly concerned about the implications of the upcoming election, the escalating global conflicts, and persistently high costs of food and credit.”

This sharp decline in consumer confidence also clouds the outlook for consumer spending, which is a crucial driver of the U.S. economy. However, it may help in keeping inflationary pressures under control.

Gina Bolvin, president of Bolvin Wealth Management Group, emphasized this point, stating, “Keep in mind that lower confidence may result in lower consumer spending. Reduced demand will continue to exert downward pressure on inflation, which ultimately benefits the consumers in the long run.”