Consumers Confidence in the Economy Just Dropped the Most in Three Years

Consumer confidence in September fell the fastest since August 2021 as more people said they were worried about deterioration in the labor market.

Publish Date: Tuesday 24th September 2024
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Consumer confidence in September fell the fastest since August 2021 as more people said they were worried about deterioration in the labor market.

The Conference Board’s Consumer Confidence Index was 98.7 in September, its largest drop in more than three years. It declined from a revised rate of 105.6. The steep drop surprised economists, who expected a reading of 104.

The index declined in all five areas it measures. Sentiment fell but remained positive for future business conditions, the current labor market, and income prospects. However, consumers' current assessment of business conditions turned negative, and pessimism about the future labor market deepened.

“The deterioration across the index’s main components likely reflected consumers' concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings—even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages,” wrote Dana Peterson, chief economist at the Conference Board.

Job Market Is Dragging Sentiment Down

Compared with the similar inflation-focused Michigan Consumer Sentiment Index, the Conference Board’s survey is more sensitive to swings in the labor market.

This month's survey results come as market watchers are focusing more on jobs after recent reports showed job creation slowing.

“Consumers are worried about the jobs market, and that's weighing on overall moods,” wrote Wells Fargo economists Shannon Seery Grein and Jeremiah Kohl.

But Interest Rate Cuts Could Boost Confidence

The Federal Reserve also cited labor market worries as one reason it made its first interest rate cut in four years last week. Lower interest rates typically spur economic development by making borrowing costs cheaper, encouraging spending and allowing businesses to hire more easily.

The Wells Fargo economists wrote that the recent interest rate cut may not be fully reflected in the survey. The survey cut-off date was Sept. 17, before the Fed’s rate cut announcement the following day.

December 22, 2024

Story attribution: Terry Lane
Investopedia

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