Stock Market Concerns
According to the Conference Board’s report, the consumer confidence index rose to 103.3 in August from 101.9 in July. This increase suggests that, overall, consumers feel more optimistic about the economic conditions.
However, Dana Peterson, Chief Economist at the Conference Board, noted that consumer sentiments were still “mixed.” While there was increased confidence in current and future business conditions, worries about the labor market continued to rise.
Peterson explained, “Compared to July, consumers were more positive about business conditions, both current and future.
However, they were also more concerned about the labor market.” Consumers’ assessments of the current labor situation, although still positive, showed signs of weakening, and their outlook on the labor market moving forward was more pessimistic.
This is likely reflective of the recent increase in unemployment. Additionally, consumers were somewhat less optimistic about future income.
The report also highlighted that consumers grew more cautious about the stock market following the early August sell-off. Less than half of consumers expect stock prices to rise in the next year.
This uncertainty in the stock market appears to influence overall consumer sentiment, even though there is still general optimism about the economy.
On the inflation front, consumer expectations showed a more positive trend. Expectations for price increases over the next year have fallen to their lowest level since March 2020, suggesting that concerns about inflation may be easing.
However, consumer confidence was not evenly distributed across demographics. The data revealed that confidence in August declined among those under 35 years old, while it increased for those 35 and older.
Regarding unemployment, the latest data indicated that in July, the unemployment rate reached 4.3%, the highest level in nearly three years.
During the same month, the US labor market added 114,000 jobs, marking the second-lowest monthly total since 2020. This was followed by an upward revision of monthly employment additions released on August 21.
The revision showed that the US economy employed 818,000 fewer people than previously reported as of March 2024, suggesting that the labor market may have been cooling earlier than initially thought.
Meanwhile, data from the Bureau of Labor Statistics showed that the quits rate, considered a sign of worker confidence, stood at 2.1% in July, the lowest level since August 2020. This decline might be an indicator that workers are feeling less confident about their job prospects.
Economists and the Federal Reserve have been paying more attention to signs of weakening in the labor market in recent weeks.
In a speech last Friday, Federal Reserve Chair Jerome Powell stated that the cooling in the labor market has been “unmistakable.”
Powell also noted that the downside risks to the central bank’s mandate for full employment have increased, adding to concerns about the direction of future monetary policy.
Overall, while data indicates a rise in consumer confidence, the growing concerns about the labor market and stock market reflect ongoing uncertainty.
Consumers seem to remain cautious about future changes, which will be a crucial factor in how they adjust to the evolving economic conditions.
