US consumer confidence falls most in three years on labor views

US consumer confidence unexpectedly fell in September by the most in three years on concerns about the labor market and the outlook for the broader economy.

The Conference Board’s gauge of sentiment decreased 6.9 points to 98.7, the biggest drop since August 2021, data out Tuesday showed. The figure was below all estimates in a Bloomberg survey of economists.

A measure of expectations for the next six months declined in September to 81.7, while present conditions dropped to 124.3.

The recent slowdown in the labor market, alongside persistently high costs of living, is weighing on consumer confidence, keeping the gauge well below pre-pandemic levels. However, an expected series of interest-rate cuts from the Federal Reserve — which started last week — has already filtered through to lower mortgage rates and other borrowing costs, which could support sentiment going forward.

“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,” Dana Peterson, chief economist at the Conference Board, said in a statement.

The share of consumers that said jobs were plentiful declined for a seventh month to 30.9%, still the smallest share since March 2021. The streak of declines is the longest since 2008. The share saying jobs were hard to get rose to 18.3%, also the highest since early 2021.

The difference between these two — a metric closely followed by economists to gauge the job market — narrowed for an eighth month.

Chair Jerome Powell said last week that while the labor market is softening, it’s still in “solid condition” and the broader economy is “basically fine.” Projections by policymakers released with the rate decision showed unemployment is expected to climb from a current 4.2% to 4.4% in the fourth quarter and hold at that level through 2025, with most officials seeing upside risk to their forecasts.

Roughly a third of consumers expect lower interest rates in the next year, still the highest share since April 2020, according to the Conference Board. Write-in responses in September also included more mentions of interest rates affecting consumer’s views of the economy.

The S&P 500 and two-year Treasury yields were lower after the report.