Americans are getting increasingly concerned about the state of the labor market even as their worries about the price of food and gas are becoming less urgent, the Conference Board Consumer Confidence Index showed on Tuesday.
Consumers appear less optimistic about their financial conditions over the next six months and their sense that the U.S. will plunge into a recession ticked up after declining over the last three months.
They are also looking to shelve plans to buy big-ticket items, such as cars and homes partly due to expectations that interest rates will rise over the next six months. The one thing they are upbeat about is the trajectory of the stock market over the next year.
Overall, consumer confidence fell in February after a rise of optimism towards the end of last year and the beginning of 2024.
"The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy," Dana Peterson, chief economist at The Conference Board, said in a statement.
The dent in feelings over the future of the U.S. economy was spread across the groups the Conference Board surveyed.
"The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000. Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 54," Peterson said.
The U.S. economy has been recovering from a COVID-induced recession that led to millions of job losses and sent the unemployment rate soaring as the country locked down in an effort to arrest the spread of the disease. The re-opening of the economy unleashed pent-up consumer demand that stretched supply chains to their limits and turbocharged inflation that at point skyrocketed to 40-year highs.
The record-high jump in prices forced the Federal Reserve to hike interest rates that have pushed borrowing costs across the economy, including for home and auto loans. Inflation has cooled while the jobs market has demonstrated strength despite the tight monetary conditions. The Consumer Price Index (CPI) inflation accelerated at a slower pace by 3.1 percent in January while the unemployment rate stood at 3.7 percent for the month.
Inflation has yet to drop to the Federal Reserve's target of 2 percent leading policymakers to hold rates at their more than two-decade levels of 5.25 to 5.5 percent at their last four gatherings. Consumers, appear concerned about inflation as well, even though they are not as concerned about food and gas prices, according to the Conference Board.
"February's write-in responses revealed that while overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months," Peterson said.
The average year-ahead inflation expectations have fallen to their lowest level since March 2020. Going forward jobs and politics are increasingly top of mind.
"[Consumers] are more concerned about the labor market situation and the US political environment," Peterson added.
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About the writer
Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
