US confidence plunges as job worries grow
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The news: US consumer confidence dropped more than expected to 98.7 in September, the steepest month to month decline in three years, foreshadowing possible worsening conditions in the labour market and increasing the likelihood of a second big cut from the Federal Reserve.
More people say they are worried about jobs with the steepest decline in confidence seen among those aged 35-54 and earning under USD50,000 ($72,780) annually.
The context: Concerns about the labour market drove the drop ahead of the Federal Reserve’s recent 50 basis point rate cut last week aimed at maintaining employment.
The Federal Reserve’s recent interest rate cut to 4.75%-5.00% was expected to support employment, but this decline may signal economic uncertainty ahead.
The lower spirits among American consumers could hurt Democratic Vice President Kamala Harris’ presidential campaign, as the economy remains a top issue for voters ahead of the election in November.
The numbers: The index, based on a survey with a 17 September cutoff, fell from 105.6 in August, to well below the Bloomberg consensus forecast of 104.0, with 18.3% of respondents viewing jobs as “hard to get.”
That was the steepest decline since August 2021, with all five components of the index deteriorating, the board said.
What they said: Dana Peterson, the Conference Board’s chief economist, said that while the labour market remains relatively healthy, worries likely stemmed from fewer hours, slower payroll increases and fewer job openings.
“The proportion of consumers anticipating a recession over the next 12 months remained low but there was a slight uptick in the percentage of consumers believing the economy was already in recession,” she said.
ING chief international economist James Knightley said that, “the latest Conference Board consumer confidence report suggests households are noticing the jobs market is cooling quickly.”
“Historically this has been a major warning signal that unemployment is going to rise. This report suggests a breach of 5% is possible before year-end, which would undoubtedly raise the odds of a second 50bp Fed rate cut.”
The source: Conference Board
