In August, the US economy sent more mixed signals. It created just 22,000 net new jobs, and the unemployment rate ticked up to 4.3%, marking its highest point since 2021. Unemployment has skyrocketed after a sudden recession in June. In that same month, the economy shed 13,000 jobs—the first net negative hiring month since 2020, when layoffs outstripped recruitment.
Against the backdrop of these trends, consumer sentiment is being rocked. University of Michigan’s index of consumer optimism dropped from 58.2 to 55.4 in August. This decrease is indicative of growing concern over the stability of the economy. We know inflation is a top concern and needs little introduction at this point. That’s adding rocket fuel to fears of stagflation, the highly undesirable economic conditions of the 1970s and 1980s, when inflation and unemployment skyrocketed into double digits.
Related to this, prospects for job creation are worsening, putting working and middle-class Americans who have been reducing their purchases more deeply at risk. By comparison, the well-off are as free-spending as ever. This stark divide in consumer behavior underscores how the current economic conditions are affecting greatly different outcomes across income ranges.
For the first time in four years, there are more people hunting for a job than jobs to be had. This pivot is emblematic of the broader, unprecedented challenges in today’s labor market. Last week, initial claims for unemployment benefits shot up to a four-year high. This increase reflects the growing stress of job security across our workforce.
“Economic sentiment declined more than expected in September largely because Americans are fearful of losing their jobs,” – Heather Long
In light of these alarming developments, some investors still hold out hope for interest rate cuts at the next few Federal Reserve meetings. The US stock market has floated to record highs. This wave suggests that investor confidence is not entirely in step with consumer confidence.
Tariffs should be a top concern for American consumers. Hundreds of individuals express their concerns about the impact of trade policies on their economic security in oral testimony and written comments.
“Trade policy remains highly salient to consumers, with about 60% of consumers providing unprompted comments about tariffs during interviews,” – Joanne Hsu