Agencies
US consumer confidence rose to a six-month high in August amid optimism over the economic outlook, but Americans are becoming more anxious about the labor market after the unemployment rate jumped to near a three-year high of 4.3 percent last month.
The better-than-expected reading in consumer confidence, reported by the Conference Board on Tuesday, reflected improved perceptions of business conditions over the next six months, and the survey suggested the odds of a recession had continued to decline.
Consumers’ uneasiness over the labor market is mirrored by concerns at the Federal Reserve, with Fed Chair Jerome Powell last Friday signaling interest rate cuts were imminent.
"This report supports a rate cut on both the decline in inflation expectations and a softening labor market, but is not so weak as to suggest a recession at this point,” said Conrad DeQuadros, senior economic adviser at Brean Capital.
The Conference Board’s consumer confidence index increased to 103.3 this month, the highest level since February, from an upwardly revised 101.9 in July.
Economists polled by Reuters had forecast the index would be little changed from the previously reported 100.3. Confidence was higher among consumers aged 35 years and older, and those with annual incomes above $100,000.
The cutoff date for the survey was Aug. 21. The rise in confidence could have been influenced by President Joe Biden dropping out of the November presidential race and the nomination of Vice President Kamala Harris to head the Democratic Party ticket.
The Conference Board made no mention of any political impact.
The University of Michigan this month, however, attributed the rise in its consumer sentiment measure in August to increased optimism among Democrats compared with Republicans. Former President Donald Trump is the Republican Party candidate in the upcoming election.
The Conference Board’s Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, improved to 82.5.
That was the highest level since August 2023 and was up from 81.1 in July. It was the second straight monthly reading above 80. A reading below 80 usually signals a recession ahead.
Consumers were less upbeat, however, about the labor market. The share of consumers who viewed jobs as "plentiful” slipped to 32.8 percent from 33.4 percent in July. Some 16.4 percent of consumers said jobs were "hard to get,” up from 16.3 percent last month.
The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, fell to 16.4, the narrowest since March 2021, from 17.1 in July. — Reuters This measure correlates to the unemployment rate in the Labor Department’s monthly employment report.
The unemployment rate has risen for four straight months. "While we wouldn’t necessarily use it to predict month-to-month changes in the unemployment rate, the fact that it keeps worsening is not a good development,” said Abiel Reinhart, an economist at JP Morgan, referring to the labor market differential.