Consumer confidence plunged in September to its lowest level since 2014, while job openings fell in August, breaking the upward trend that had taken labor demand to a two-year high earlier this year.
The Conference Board’s Consumer Confidence Index fell by 6.7 points to 81.9 in September, well below expectations and the lowest reading since April 2014.
The decline was broad-based, with both consumers’ assessment of current conditions and their expectations for the next six months deteriorating.
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According to our earlier study, a prolonged closure of the Strait of Hormuz would create conditions for severe demand destruction.
Although we are not yet seeing that “severe” level—partly because oil prices briefly declined over the summer—we are seeing demand destruction reemerge, especially in overall sentiment and spending.
With diesel prices remaining above $6, inflationary pressures are being passed through to other parts of the economy, including transportation and retail.
Although we still expect the labor market to remain solid over the next couple of months, there is no guarantee that labor demand will hold up under pressure from falling overall demand if the crisis continues to spill over.
The drop in job openings in August was therefore not an encouraging sign for growth. Job openings fell by 256,000 to 7.08 million after reaching 7.59 million in May—a decline of about 7% from the year’s peak.
For now, it looks increasingly likely that we will experience a period of stagflation-lite for the rest of the year.
Inside the data
- Consumer confidence: The Conference Board’s Consumer Confidence Index fell 6.7 points to 81.9 in September, its lowest level since April 2014. The decline was broad-based, with the Present Situation Index falling 7.9 points to 109.3 and the Expectations Index dropping 5.9 points to 63.6. The Expectations Index remains below the level historically associated with recession concerns, highlighting the deterioration in consumers’ outlook.
- Labor demand: Job openings fell by 256,000 to 7.08 million in August, after reaching 7.59 million in May. That represents a decline of roughly 7% from the year’s peak and reverses much of the improvement seen earlier in the year. The job openings rate also edged down to 4.3% from 4.4%, suggesting that labor demand is beginning to lose momentum even though layoffs remain relatively low.
