Consumer confidence sees largest decline in more than 3 years

Consumer confidence tumbled in September as Americans grew increasingly worried about a cooling labor market.

The latest index reading from the Conference Board was 98.7, below the 105.6 seen in August and lower than what the 104 economists surveyed by Bloomberg expected. The drop in consumer confidence from August to September was the largest decline since August 2021, according to the Conference Board.

"Consumers' assessments of current business conditions turned negative while views of the current labor market situation softened further," Conference Board chief economist Dana Peterson said in the release. "Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income."

The cutoff date for the release was Sept. 17, meaning respondents replied to the survey before the Fed announced it would cut its benchmark interest rate by half a percentage point on Sept. 18. But there had been several signs of softening in the labor market before consumers replied.

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Unemployment has steadily risen throughout 2024 and sits at 4.2% , just below its highest level in almost three years. Meanwhile, job openings declined in July to their lowest level since January 2021.

Last Wednesday, Federal Reserve Chair Jerome Powell acknowledged there are rising risks of further slowing in the labor market. But for now, he sees a labor market that is "actually in solid condition."

"The US economy is in good shape," Powell said. "It's growing at a solid pace. Inflation is coming down. The labor market is in a strong place. We want to keep it there. That's what we're doing [by cutting interest rates]."

Still, respondents to the September consumer confidence survey are clearly feeling the effects of a labor market in which fewer companies are looking to hire new workers. In September, 18.3% of consumers said jobs were "hard to get," up from 16.8% the month prior. The labor market differential, which represents the difference between consumers who view jobs as "plentiful" and those who say they are "hard to get," was the lowest since March 2021.

Consumer confidence sees largest decline in more than 3 years
Confidence is down but consumers continue to spend? Apple's Fifth Avenue store in Manhattan. (AP Photo/Pamela Smith) (ASSOCIATED PRESS)

"The persistent drop in this measure is a clear sign that the labor market is not nearly as tight as it once was," Wells Fargo economist Shannon Seery Grein wrote in a note to clients on Tuesday. "That said, we're hesitant to put too much weight on this data given broader confidence measures have remained depressed this cycle despite resilient spending habits of households."

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer .