The latest Consumer Confidence Index reveals a significant downturn in Americans’ economic outlook, raising concerns about the health of the economy and job market in the United States.

The Conference Board, a nonpartisan think tank that provides analysis on future trends, reported on Tuesday that consumer confidence plummeted to 98.7 in September from 105.6 in August, marking the steepest decline in three years.

“Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” Dana M. Peterson, chief economist at the Conference Board, said in a statement. “September’s decline was the largest since August 2021 and all five components of the Index deteriorated.”

The index, a key indicator of consumer attitudes and purchasing intentions, reveals that Americans are increasingly skeptical about the job market, with a rising number of respondents describing jobs as “hard to get.” This perception has intensified, jumping from 16.8% in August to 18.3% in September.

“The deterioration across the Index’s main components likely reflected consumers’ concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings—even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages,” Peterson added.

Here’s What’s Happening

The Consumer Confidence Index paints a bleak picture of American sentiment, highlighting widespread negativity about current business conditions and a growing pessimism regarding future labor market prospects.

The data shows a noticeable decrease in the percentage of consumers who view jobs as “plentiful,” dropping from 32.7% in August to 30.9% in September.

Pessimism about future employment prospects also increased, with more people anticipating fewer jobs available in the coming months, rising from 17.0% to 18.3%.

The decline in consumer confidence was particularly significant among individuals aged 35 to 54 and those with annual incomes below $50,000, suggesting that anxiety about the job market is especially prevalent among middle-aged workers and lower-income groups.

The Federal Reserve’s move last week to reduce interest rates reflects that the central bank also has a growing unease about the labor market, as it seeks to counteract signs of a “cooling” job landscape.

In July, the unemployment rate in the U.S. increased to 4.3%, marking its highest level since October 2021, as reported by the Bureau of Labor Statistics. The rate remained relatively stable at 4.2% last month.

By focusing on the labor market, the Fed aims to correct course and bolster confidence among consumers and businesses alike.

The Impact On The Job Market

If consumer confidence continues to plummet, it could have a significant long-term impact on American workers. A prolonged drop in consumer confidence often leads to decreased consumer spending, as individuals become more cautious about their financial futures, opting to save rather than spend on non-essential goods and services.

This reduction in spending can create a ripple effect throughout the economy, causing businesses to experience lower revenues and profits. Companies may then implement hiring freezes, layoffs or reduce working hours to mitigate costs.

As businesses adopt a more conservative approach to expansion and investment, the rate of job creation is likely to slow down, resulting in fewer new job openings and increased competition for available positions, which could lead to stagnating wages.

Moreover, a persistent decline in consumer confidence would shift job market dynamics, with more individuals turning to freelance or contract work as full-time positions become scarcer, unemployment rates increase and people experience longer periods of joblessness.