Key Takeaways
- The Consumer Confidence Index dropped to 98.7 in September, the largest decline since August 2021.
- Unemployment rose to 4.2%, and job openings hit their lowest level since January 2021, indicating reduced hiring demand.
- The cooling labor market raises concerns about the U.S. economy’s long-term strength, with potential impacts on growth and inflation.
Consumer confidence took a sharp dive in September as concerns over a softening labor market mounted, marking the largest decline since August 2021. The Conference Board’s latest Consumer Confidence Index dropped to 98.7, down from August’s 105.6. The steep drop reflects growing anxiety about both current and future labor market conditions, fueling concerns about the broader health of the U.S. economy. The survey, which concluded on September 17, predates the Federal Reserve’s decision to cut its benchmark interest rate by half a percentage point on September 18.
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Rising Unemployment, Declining Job Openings
Unemployment has edged higher throughout 2024, reaching 4.2% in September—just shy of a three-year peak. Job openings, meanwhile, dropped in July to their lowest level since January 2021, reflecting a slowdown in hiring demand across several sectors.
Federal Reserve Chair Jerome Powell acknowledged these labor market pressures last week, noting that the economy faces rising risks of further softening. However, Powell stressed that he still sees the labor market as fundamentally sound. According to him, the US economy is in good shape and growing at a solid pace.
Despite Powell’s optimistic tone, the data from the Conference Board suggests consumers are feeling the pinch of a labor market in flux. In September, 18.3% of respondents reported that jobs were “hard to get,” up from 16.8% in August. The labor market differential—the gap between those who view jobs as “plentiful” and those who find them “hard to get”—narrowed to its lowest point since March 2021.
Eroding Labor Market Sentiment
This persistent decline in labor market sentiment is a worrying signal for economists. However, they caution against reading too much into the confidence data, as consumer sentiment has remained weak throughout this cycle despite resilient household spending.
The labor market’s cooling could also affect inflationary pressures, as slower hiring may reduce wage growth and curb consumer spending. However, so far, spending has held up better than sentiment would suggest, buoying hopes that the economy could sidestep a deeper downturn.
Economic Outlook Clouded by Uncertainty
The September decline in confidence comes amid a complex economic backdrop. While the Federal Reserve continues to fight inflation with interest rate cuts, the persistent cooling in the labor market raises questions about the long-term strength of the U.S. economy. With unemployment ticking up and job openings declining, many are bracing for a period of slower economic growth. The next few months will be critical in determining whether the U.S. economy can sustain its momentum in the face of mounting labor market headwinds.
