In September, U.S. consumer confidence witnessed a notable decline, reflecting growing pessimism among Americans regarding inflation and the weakening job market. According to the latest report from the Conference Board, the consumer confidence index fell by 3.6 points, dropping to 94.2 from August's 97.8. This decline exceeded analysts' expectations and marked the lowest reading since April, coinciding with the implementation of President Donald Trump's significant tariff policy.
The survey indicated that Americans' short-term expectations regarding their income, business conditions, and the job market also took a hit, falling to 73.4. This figure remains significantly below the crucial threshold of 80, which typically signals a potential recession. Furthermore, consumers' evaluations of their current economic situation decreased by 7 points, landing at 125.4, showcasing growing concerns about the economic landscape.
Write-in responses from the survey revealed that mentions of prices and inflation surged this month, reclaiming their position as the foremost concern among consumers regarding the economy. Although references to tariffs saw a decline, they remain at elevated levels, as noted by the Conference Board. Recent government data highlighted that inflation increased in August, driven by rising prices for gas, groceries, and airfares. The Labor Department reported a 2.9% increase in consumer prices year-over-year, up from 2.7% the previous month, marking the most significant jump since January.
Despite historically low unemployment and layoffs, the labor market has shown signs of noticeable deterioration this year. There is mounting evidence illustrating that many individuals are struggling to secure employment. Earlier reports revealed that U.S. nonfarm employers added just 22,000 jobs in August, a stark contrast to July's disappointing figures of 79,000 job gains. Additionally, revisions to the employment figures for May and June resulted in a reduction of 258,000 jobs from previous estimates.
The current unemployment rate stands at 4.3%, marking the highest level since October 2021. Concurrently, the Labor Department reported that U.S. job openings in August remained steady at 7.2 million, consistent with the previous month. The lingering impact of 11 interest rate hikes by the Federal Reserve in 2022 and 2023 has also contributed to the current hiring slump. Economists attribute this trend to the repercussions of Trump’s policies, including fluctuating tariffs on imports, stricter immigration enforcement, and reductions in the federal workforce.
As consumer sentiment shifts, the share of individuals anticipating a recession over the upcoming year has risen modestly in September, reaching the highest level since May. Additionally, survey participants intending to purchase a new or used car declined, whereas the proportion planning to buy a home increased to a four-month high. Interest in big-ticket items, such as appliances, remained relatively unchanged from August, with significant variations across different categories.
More insights into the labor market are expected when the government releases its September job data, with analysts predicting an addition of 50,000 jobs. However, this report may face delays if the ongoing budget impasse in Congress results in a government shutdown on Wednesday.
