Consumer confidence declined in August as concerns about income stagnation and a cooling job market weighed on Americans’ economic outlook. The Conference Board reported a 1.3-point drop in its sentiment index to 97.4, with expectations for the next six months also falling. Notably, the share of consumers who believe jobs are hard to find reached its highest level since 2021, and more respondents anticipate a decrease in their income.
The labor market appears to be softening, with Federal Reserve Chair Jerome Powell highlighting a sharp slowdown in job creation. Richmond Fed President Tom Barkin noted that while businesses aren’t actively hiring, they’re also not laying off workers, contributing to a steady unemployment rate around 4.2%. This reflects a broader decline in both labor demand and supply.
Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board, said, “the present situation and the expectation components both weakened. Notably, consumers’ appraisal of current job availability declined for the eighth consecutive month, but stronger views of current business conditions mitigated the retreat in the Present Situation Index. Meanwhile, pessimism about future job availability inched up and optimism about future income faded slightly. However, these were partly offset by stronger expectations for future business conditions.”
Inflation remains a pressing concern for policymakers. Powell stated that the Fed’s preferred inflation gauge rose to 2.9% in July, edging further from the central bank’s 2% target. Consumers’ inflation expectations also jumped to 6.2%, driven by rising prices for essentials like food and groceries. Survey responses indicated growing anxiety over tariffs and their inflationary impact.
"A very modest decline in consumer confidence given the amount of economic and political uncertainty as the tariff and immigration sagas play out. Most of the tariff impact is likely to impact lower end consumption, so not surprised to see a dip in confidence. Key economic variables remain tightly balanced, and we are closely monitoring anything that can tip the scales," Eric Teal, chief investment officer for Comerica Wealth Management, told InvestmentNews.
Trade policy changes under the Trump administration have contributed to these inflationary pressures. The average tariff rate now stands at 18.6%, the highest since 1933, according to the Yale Budget Lab. These import duties are expected to raise short-term prices by 1.8%, translating to an estimated $2,400 income loss for the average U.S. household. Tariffs and inflation continue to dominate consumer concerns.
Despite the current pessimism, there are signs of potential recovery. The share of consumers expecting worsening business conditions declined slightly, and economists anticipate a rebound in economic growth during the second half of 2025. The Atlanta Fed projects GDP to grow at an annualized rate of 2.2% this quarter, suggesting that while challenges persist, a modest upswing may be underway.
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