Key Takeaways

  • Consumer confidence fell this month as concerns about slowing income growth and a cooling labor market weighed on both current and future economic outlooks, according to data released Tuesday by The Conference Board.
  • The Consumer Confidence Index declined 1.3 points to 97.4, and the measure of expectations for the next six months also slipped. The share of consumers saying jobs are hard to get rose to its highest level since 2021, while the proportion expecting income declines increased to 12.6% from 11.8% in July.
  • "Consumers' assessments of current job availability have now declined for eight consecutive months," said Stephanie Guichard, senior economist for global indicators at The Conference Board, in a statement. "Pessimism about future job availability has increased slightly, while optimism about future income growth has weakened."

Deep Dive

Consumer confidence continues to trend lower amid slowing income growth, the potential for Trump administration tariffs to push inflation higher, and reduced hiring and job opportunities.

Federal Reserve Chair Jerome Powell highlighted the "downside" risks to employment on Friday, noting that U.S. nonfarm payrolls averaged only 35,000 new jobs per month from May through July, compared with a monthly average of 168,000 last year.

"Interestingly, for a year and a half we've been hearing companies say they're not hiring," Richmond Fed President Tom Barkin said in a Bloomberg podcast released Monday. "They're also not laying off," he added, noting that with both labor supply and demand declining, the unemployment rate has hovered near a historic low of 4.2%.

In his remarks, Powell said policymakers face a "challenging situation," balancing a weakening labor market against the possibility of rising inflation. He mentioned that the Fed's preferred inflation gauge—the personal consumption expenditures price index excluding volatile food and energy prices—likely rose 2.9% last month, up from 2.8% in June, moving further from the central bank's 2% long-term target.

Guichard said consumers' average inflation expectations for the next 12 months jumped to 6.2% this month from 5.7% in July. She noted that open-ended responses in the survey "showed an increase in mentions of tariffs, which continue to be associated with concerns about rising prices." Additionally, "mentions of high prices and inflation, including food and groceries, rose again in August."

According to data from the Yale Budget Lab, after President Trump adjusted trade policy, the average tariff rate faced by consumers is 18.6%, the highest since 1933. The institution said this month that import tariffs will raise the short-term price level by 1.8%, equivalent to a loss of $2,400 in income for the average American household.

The Conference Board said consumers' pessimism about future business conditions eased in August, with the share expecting conditions to worsen falling to 21.9% from 22.7% in July. Economists believe economic growth could pick up in the second half of 2025 after a weak first half. The Atlanta Fed projected Tuesday that gross domestic product will grow at an annualized rate of 2.2% in the current quarter.