Dive Brief:
- Consumer confidence rose slightly this month despite signs of weakness in the job market as fears of recession eased, the Conference Board said Tuesday.
- While consumers’ view toward business conditions brightened, their assessment of job availability fell for the seventh straight month, hitting the lowest level since March 2021, the Conference Board said, citing a survey.
- “The big story remains the frozen labor market,” Navy Federal Credit Union Chief Economist Heather Long said. “Americans do not think it is easy to get a job right now," she added in an email, noting that the portion of consumers saying work is hard to find rose to nearly 19% this month from 14.5% in January.
Dive Insight:
Indications of a cooling in the labor market recently prompted two Federal Reserve officials to voice openness toward cutting the main interest rate at a two-day monetary policy meeting that ends Wednesday.
Fed Governor Christopher Waller called on his fellow policymakers to cut borrowing costs by 0.25 percentage point.
“While the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed and other data suggest that the downside risks to the labor market have increased,” Waller said in a July 17 speech.
“With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate,” he said. The central bank over time should aim to trim the benchmark rate to 3%, a “neutral” level that Fed officials believe would neither slow nor spur economic growth.
Traders in futures markets have nearly ruled out the likelihood of a reduction in borrowing costs on Wednesday, setting 97.9% odds that policymakers will hold the federal funds rate at a range from 4.25% to 4.5%, according to the CME FedWatch Tool. They see 62.8% odds of a quarter-point cut after Fed officials next meet Sept. 16-17.
Fed Chair Jerome Powell and other policymakers this year have chosen to forgo further reductions in the main interest rate until they are confident that a sudden surge in tariffs under the Trump administration does not rekindle inflation. Central bank officials aim to cool inflation to their 2% target.
A flagging labor market may prompt the next reduction in borrowing costs. Job openings fell in June compared with May and the hiring rate fell to 3.3%, one of the lowest levels since 2013, according Labor Department data released Tuesday.
The proportion of consumers that consider jobs hard to find rose this month to 18.9% from 14.5% in January, the Conference Board said.
The increase in U.S. import duties also weighs on the minds of consumers, according to Stephanie Guichard, senior economist for global indicators at the Conference Board.
“Tariffs remained top of mind and were mostly associated with concerns that they would lead to higher prices,” Guichard said.
In written survey responses, consumer “references to high prices and inflation rose in July, even though consumers’ average 12-month inflation expectations eased slightly to 5.8%, down from 5.9% in June and a peak of 7% in April,” she said.
