Consumer confidence in the U.S. economy took a sharp nosedive in September, marking the biggest one-month decline since the onset of the COVID-19 pandemic.
According to the Conference Board’s Consumer Confidence Index, the figure fell from 105.6 in August to 98.7 in September.
This is the steepest drop seen since August 2021, signaling growing concerns among Americans about economic conditions, particularly in the labor market.
Dana Peterson, chief economist at The Conference Board, highlighted that all five components of the index showed deterioration.
“September’s decline was the largest since August 2021, and consumers’ assessments of current business conditions turned negative, while views of the current labor market situation softened further,” Peterson said.
The Present Situation Index, which evaluates current economic and labor conditions, dropped by more than 10 points to 124.3. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook, also dipped to 81.7, just above the threshold that often signals a potential recession.
The Conference Board also pointed out that inflation remains a persistent concern despite recent efforts by the Federal Reserve to curb it.
Inflation expectations for the next 12 months rose to 5.2%, even though inflation rates have eased in recent months to their lowest level in three years.
Many consumers remain concerned about rising prices and the impact on their financial situation, as mentioned in the report’s survey responses.
Concerns over the labor market were among the most significant factors driving the decline in confidence.
Recent revisions to federal data revealed that the U.S. economy created 818,000 fewer jobs than previously estimated last year.
This 30% reduction in reported job growth marked the largest data revision in 15 years. The labor market, which appeared stronger last year, is now viewed in a much weaker light.
Wealthier Americans seem to have been less impacted by the decline, while those in lower income brackets felt the strain the most.
The sharpest drop in confidence was seen among consumers aged 35 to 54, with younger Americans under 35 remaining the most confident.
Consumers earning less than $50,000 annually experienced the most significant decrease in confidence, while those earning over $100,000 remained relatively more optimistic.
Parker Ross, Global Chief Economist at Arch Capital Group, echoed the concerns about the labor market, noting on X that the labor market differential saw its worst monthly decline in six months.
This trend suggests that the unemployment rate could continue to rise in the coming months, despite unemployment still being low.
Although inflation has slowed since its rapid rise earlier in the Biden administration, the cumulative effect of rising prices has taken a toll on American households.
The federal government’s overestimation of job creation last year has further strained consumer outlooks.
With confidence dipping below key levels, and concerns about a potential recession on the rise, many Americans are bracing for more difficult economic times ahead.