A New Factor Behind People’s Concerns About the Economy

The latest figures from the Conference Board indicate a significant drop in consumer confidence for September, marking the steepest decline since August 2021. This downturn in sentiment can be largely attributed to changing perceptions about the labor market, which has experienced a slowdown in recent months, sparking concerns among American workers.

As fears of inflation fade, worries about job availability have taken center stage. While the job market remains historically strong, fluctuations in employment rates and hiring have altered Americans’ general outlook on the economy. This shift represents a notable change in the overall atmosphere of economic confidence.

Federal Reserve Chairman Jerome Powell underscored this transition when the Fed cut interest rates for the first time in four years last Wednesday. He noted that as inflation eases and the labor market varies, the risks associated with employment have intensified. While the majority of consumers do not foresee a recession, many still have concerns about their future job prospects, reflecting a growing uncertainty in the employment landscape.

The job market has shifted following a brief period of abundant opportunities. In 2021, low borrowing costs led many companies to compete aggressively for talent, allowing workers to switch jobs more easily and negotiate higher salaries. However, this trend has waned, particularly in sectors like information and technology, where layoffs and hiring slowdowns have become prevalent.

The Conference Board reported that only 30.9% of consumers believe that jobs are plentiful, down from 32.7% in August. Conversely, the percentage of consumers stating that jobs are hard to come by increased to 18.3%, up from 16.8%. Economists at Wells Fargo observed that this continuous decline signifies a labor market that is not as strong as it once was.

Dana M. Peterson, chief economist at the Conference Board, pointed out that the growing concerns regarding the labor market likely reflect consumers’ reactions to reduced working hours, slower wage growth, and fewer job vacancies. She emphasized that while these factors indicate a less robust job market, overall, it remains healthy with low unemployment levels and minimal layoffs.

Looking ahead, consumers are bracing for more challenges. The data shows that 13% anticipate a decrease in their income over the next six months, an increase from 11.7% in August. This growing anxiety about financial security underscores the shift in consumer sentiment.

Compounding these concerns, a July survey by the Federal Reserve Bank of New York revealed that more Americans are actively seeking employment. The percentage of individuals looking for jobs has reached levels not seen since March 2014. The survey suggests diminishing confidence in finding new roles, as the perceived likelihood of securing a job has declined since early 2023.

The job market appears to be contracting as well. The latest Job Openings and Labor Turnover Survey recorded 7.7 million job openings in July, a decline of 1.1 million when compared to the previous year. Within the information sector alone, job openings significantly decreased from 158,000 last July to just 113,000 this year.

Despite these challenges, there are some positive developments. The Federal Reserve’s recent decision to cut interest rates could stimulate hiring, thereby reducing consumer debt burdens. Furthermore, the stock market is reaching new heights, suggesting that workers’ investments might remain resilient. However, it will take time before the effects of this monetary policy are felt in daily life and on the job front.

Economist Julia Pollak from ZipRecruiter pointed out that those currently satisfied in their jobs are in a favorable position. In contrast, recent graduates and individuals seeking new employment may find it especially tough to secure roles—particularly in the private sector outside of the healthcare field. 

As many face uncertainty in their job searches, the evolving dynamics of the labor market will continue to impact consumer attitudes toward the economy.

Source: Business Insider