American consumers are feeling less confident this month, with the Conference Board reporting a decline in the consumer confidence index to 98.7 in September from 105.6 in August. This drop was the largest since August of 2021 and was driven by concerns about jobs. The measure of Americans’ short-term expectations for income, business, and the job market fell to 81.7 from 86.3 in July, signaling potential recession concerns. Dana Peterson, the Conference Board’s chief economist, noted that consumers’ assessments of current business conditions and the labor market situation were negative, leading to increased pessimism about future labor market conditions.
The labor market has been weakening in recent months, with employers adding a modest 142,000 jobs in August and the unemployment rate ticking down to 4.2% from 4.3%. However, hiring numbers for June and July were revised downward by a combined 86,000, and the government reported that the U.S. economy added 818,000 fewer jobs from April 2023 through March this year than originally reported. These revisions reflect a trend of the job market steadily slowing down, contributing to the Federal Reserve’s decision to cut its benchmark borrowing rate by 50 basis points in its first rate cut in more than four years.
The Federal Reserve’s rate cut, double the usual amount, lowered its key rate to around 4.8% from a two-decade high of 5.3% and reflected a new focus on bolstering a softening job market. Inflation has also receded from a peak of 9.1% in mid-2022 to a three-year low of 2.5% in August, close to the Fed’s 2% target. Fed policymakers signaled their intention to cut the key rate by an additional half-point in their final two meetings of the year, with plans for four more rate cuts in 2025 and two in 2026. The Conference Board’s report on consumer confidence for September showed a decline in consumers’ view of current conditions to 124.3 from 134.3, highlighting the importance of consumer sentiment and spending in the U.S. economy.
Consumer spending accounts for nearly 70% of U.S. economic activity and is closely monitored by economists for insights into how Americans are feeling about the economy. This decline in consumer confidence, driven by concerns about the job market and current economic conditions, could have significant implications for future economic growth and stability. The Federal Reserve’s aggressive rate cuts and focus on supporting the labor market indicate a shift in policy towards addressing these concerns and boosting overall consumer sentiment. As the year progresses, monitoring consumer confidence indicators will be crucial for identifying potential trends in economic growth and stability.
