Consumer confidence slid again in October, a stark contrast to the high-flying rally in the equity markets—a reflection of what we call the K-shaped economy.
According to the Conference Board, confidence fell to 94.6 from 95.6 in October.
Low- and middle-income consumers, especially those living paycheck to paycheck, remain concerned about the economy. For them, the surge in stock prices does not translate into real relief when income and job security are at risk.
The subindex for job growth within the consumer confidence report remained near a five-year low, inching up only slightly in October.
Risks from slower hiring because of trade uncertainty are one reason for the unease among workers; another is the widespread push for artificial intelligence adoption across sectors, which could result in more layoffs and hiring freezes—particularly for entry-level positions, at least in the short run.
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Job cuts stemming from AI adoption should improve productivity, reduce costs and, as a result, boost profit margins and stock prices. But at the same time, displaced workers will most likely find it increasingly difficult to secure jobs that can be automated by AI.
The Federal Reserve can help support the economy with additional rate cuts—starting with another 25 basis-point reduction this week. But it’s difficult to fully gauge the impact of the Fed’s actions when new government data is not being released on time because of the shutdown.
Without timely data on the economy’s performance, the current divergence is likely to persist: rising financial conditions standing in stark contrast to unrelieved concerns about inflation, trade and job security.
