Overview
U.S. consumer confidence took a sharp dip in September as concerns about the labor market and job security grew. According to the Conference Board, the consumer confidence index fell to 98.7, its steepest drop in over three years, signaling a growing anxiety about the economic future.
Why It Matters
This drop in confidence reflects deeper concerns about the U.S. economy, particularly the labor market, and raises questions about the country’s economic resilience in the face of slowing growth and persistent inflation.
Who It Impacts
The drop in consumer confidence impacts American workers, especially those concerned about job security, wages, and economic stability in the coming months.
In September, U.S. consumer confidence saw its most significant decline in over three years, with rising fears about job security and a softening labor market at the forefront. The Conference Board reported that its consumer confidence index dropped to 98.7, down from 105.6 in August. This decline reflects growing concerns across key economic factors, including employment conditions, business outlooks, and income expectations.
Dana Peterson, chief economist at the Conference Board, noted that consumer sentiment had turned notably pessimistic in September, particularly when it came to assessments of current business conditions and labor market opportunities. “Consumers were more pessimistic about future labor market conditions and less positive about future business conditions and future income,” Peterson explained, highlighting the growing sense of economic uncertainty among Americans.
One of the main drivers behind the drop in confidence was the labor market. The Conference Board’s “present situation index,” which measures current business and labor market conditions, fell by 10.3 points to 124.3. Meanwhile, the “expectations index,” which gauges consumer sentiment about future income, business, and job prospects, slid by 4.6 points to 81.7, barely above the critical threshold that signals a potential recession.
While the labor market overall remains relatively healthy, with low unemployment and high wages, the decline in consumer confidence suggests that Americans are increasingly worried about what’s on the horizon. These concerns are not unfounded, as fewer job openings and slower payroll growth are beginning to signal cracks in what has been a strong labor market. The sharpest drop in confidence was seen among consumers aged 35 to 54, a group typically in their peak earning years and particularly sensitive to labor market conditions.
The dip in consumer sentiment aligns with other economic indicators that suggest a slowdown is occurring in various sectors. The U.S. manufacturing sector contracted in September, with the S&P Global Manufacturing PMI falling to 47.0, its lowest level in 15 months. Factory activity declined as new orders weakened, and job losses accelerated at a pace not seen in over 14 years, excluding the pandemic period. This manufacturing downturn has compounded concerns about economic growth and job security.
While the manufacturing sector struggles, the service sector remains strong. The S&P Global Services Purchasing Managers Index held steady at 55.4 in September, indicating ongoing expansion in this area of the economy. However, this resilience in services has not been enough to offset growing concerns among consumers about the broader economic outlook.
Inflation also remains a significant worry for American consumers. The Conference Board’s report showed that inflation expectations for the next 12 months have risen to 5.2 percent, as prices for essential goods like groceries, rent, and gas continue to climb. These inflationary pressures, combined with a cooling labor market, have further dampened confidence in the U.S. economy’s ability to recover fully in the near term.
Corporate leaders are beginning to pull back in response to these trends. The Business Roundtable’s latest CEO Economic Outlook Survey showed that hiring expectations for the next six months have dropped, as business leaders anticipate slowing sales and a continued softening of the labor market. This cautious approach from the private sector reflects the uncertainty that both consumers and corporations feel as they navigate a slowing economy.
The decline in consumer confidence is not just a reflection of current economic realities but also an indicator of what may lie ahead. With inflation still stubbornly high, and the labor market showing signs of strain, Americans are rightfully concerned about their financial future. The combination of weaker job growth, higher inflation, and a slowdown in manufacturing suggests that the U.S. economy may be facing more significant challenges in the months to come.
