Consumers are feeling the pains of a cooling labor market.

On Tuesday, the latest Consumer Confidence Index release showed a narrowing margin between respondents who are finding jobs “plentiful” and those who are finding jobs “hard to get.”

The Conference Board senior economist Stephanie Guichard told Yahoo Finance that workers feeling less confident about the labor market isn’t “something unexpected,” given a recent rise in the unemployment rate and a decline in job openings.

But to Guichard, it’s less of a red flag about where the labor market sits today and more about consumers reacting to a shift from a “super hot” job market to one that is just “strong.”

“When you look at the history of the labor market, this is still among the best labor [markets] we’ve had,” Guichard said. “But consumers are reacting to the change.”

Recent data has undoubtedly shown a labor market that’s far cooler than the hot jobs market of 2022, which rebounded following pandemic shutdowns. The unemployment rate has steadily crept up in 2024 and sits at 4.2%, near its highest level in almost three years. Meanwhile, job gains have slowed, with the US economy recording two of its lowest monthly job addition periods of 2024 in July and August.

Job openings in July were at their lowest level since January 2021, while quits — remember “quiet quitting?” — have also ticked lower. This, economists say, has marked a shift from the “Great Resignation,” where new jobs and hefty raises were plentiful, to the “Great Stay” where layoffs haven’t picked up but fewer people are switching jobs.

Guy Berger, the director of economic research at The Burning Glass Institute, a research center that studies labor data, told Yahoo Finance that the declining number of quits shows that workers are feeling the impacts of a weaker labor market.

“It’s the realization that if they leave their job, it’s going to be hard to find a new one,” Berger said.

For now, the Fed appears to be OK with this state of affairs. Federal Reserve Chair Jerome Powell said in a recent press conference that despite the slowing the labor market 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].”

Read more: How does the labor market affect inflation?

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Economists largely agree that there are signs of slowing in the labor market. But when taken at face value, the current situation doesn’t seem bad.

As Berger put it, there’s no labor market data that looks “really bad.”

Still economists like Berger are nervous about what lies ahead. The key concern remains the trend of the data. And most of those data points, Berger said, are headed in the wrong direction.

“We’re in this slow, ongoing deterioration thing,” Berger said. “It’s brought us to the point where things have changed from amazing to very good to good to OK, and there’s no sign of it stopping imminently,” Berger said.

He added, “The reason to be optimistic is just the forces that eventually get it to stop are underway, which is the Fed easing.”

The Fed’s interest rate-cutting cycle comes at a critical juncture for the labor market. Sure, some data has worsened, But widespread layoffs have not yet been a feature of the labor market slowdown — a key talking point for economists that believe the Fed can stick the so-called “soft landing,” in which inflation retreats and the US economy staves off recession.

After heating up briefly during the summer, new data out Thursday showed weekly unemployment claims were at a four-month low for the week ending Sep. 21.

Wells Fargo economist Shannon Seery Grein told Yahoo Finance an increase in layoffs remains one of the biggest risks to the US economy. Typically, wide-scale layoffs spark fear and shock among households and often weigh on consumer spending, Grein said.

If spending slows, business growth slows. And slowing business activity leads to a need for fewer workers. Then come more layoffs and more overall slowing in the economy.

And so on.

For now, though, that’s not Grein’s base case.

“It doesn’t feel like we’re on the cusp of widespread layoffs,” Grein said. “It just doesn’t feel like demand supports that. It doesn’t feel like businesses are really getting ready to shed workers when you think about where their profitability is.”

She added: “It just feels like we’re kind of stalling out here, and we do have, you know, some give to stall out without falling into a recession.”

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

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