US consumer confidence fell sharply in September to near its lowest level in 12 and a half years as Americans became more worried about job availability, business conditions and household finances, according to the Conference Board survey reported by Reuters.
The decline is notable because consumer spending remains a central engine of the US economy. Confidence does not always translate directly into spending, but sustained pessimism can make households more cautious about major purchases and discretionary expenses.
How far did confidence fall?
The Conference Board’s Consumer Confidence Index dropped to 88.2 in September from an upwardly revised 97.8 in August. Economists surveyed by Reuters had expected a reading of 95.5.
The survey’s expectations component fell to its lowest level since April 2013, while consumers’ assessment of current conditions also weakened.
Jobs are becoming harder to find
One of the clearest warning signs came from consumers’ perceptions of the labor market. The share saying jobs were “plentiful” fell, while the share describing jobs as “hard to get” increased.
That matches the direction of recent employment data. The United States added only 29,000 jobs in September and unemployment increased to 4.2%. Read NewsNationOnline’s five-number breakdown of the September jobs report.
Why confidence can weaken before layoffs surge
Businesses have not yet begun broad layoffs. First-time applications for unemployment benefits remain near historic lows. But hiring has slowed, making it more difficult for people who are unemployed or want to switch jobs to find new positions.
This “low-hire, low-fire” environment can damage confidence even when most workers remain employed, because households may feel less secure about their options if they lose a job.
Prices remain a source of frustration
Consumers are also dealing with elevated costs for housing, food, energy and other necessities. Even when the inflation rate slows, prices do not generally return to their old levels; they simply rise more slowly.
That distinction helps explain why households can remain unhappy about affordability even when official inflation readings improve.
Gasoline and geopolitical risk matter
Oil and gasoline prices have been affected by Middle East tensions and concerns about global fuel supply. Higher energy costs are visible to consumers and can quickly influence perceptions of the economy.
Energy inflation also matters to the Federal Reserve because it can complicate decisions about interest rates when the labor market is simultaneously losing momentum.
Consumers have not stopped spending
Despite weak confidence, consumer spending has remained relatively resilient. Reuters reported that second-quarter US economic growth was revised higher, supported by robust household spending and business investment.
This is not unusual. Confidence surveys measure attitudes and expectations, while spending data measure actual behavior. Households can feel pessimistic and still spend because of wages, savings, credit needs or essential expenses.
Why businesses watch confidence surveys
Retailers, automakers, homebuilders and service companies use consumer sentiment as one signal about future demand. If households become cautious, they may postpone large purchases such as cars, appliances, travel or homes.
Housing is particularly sensitive because mortgage rates remain elevated. NewsNationOnline’s borrower guide explains why softer jobs data does not automatically produce cheaper mortgages.
What this means for the Federal Reserve
Weak confidence and slower hiring argue for caution on additional rate increases. Persistent inflation and energy-price risks argue in the opposite direction.
Fed officials have said they still have time to review incoming data before the October 27-28 meeting. Markets currently see less likelihood of an immediate hike following the weak September jobs report.
What happens next?
The next confidence readings will show whether September’s plunge was temporary or part of a sustained deterioration. Economists will compare those surveys with actual retail sales, employment, wage growth and inflation.
For now, the message from households is clear: many Americans are increasingly uneasy about jobs and costs even while the broader economy continues to expand.
External sources: Reuters on consumer confidence and Reuters on US economic growth.
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