Key takeaways:

  • Consumer confidence rose slightly this month despite signs of a softening job market, easing recession worries, the Conference Board said Tuesday.
  • Consumers' views on business conditions improved, but their assessment of job availability fell for the seventh consecutive month, hitting the lowest level since March 2021, the Conference Board said, citing a survey.
  • "The core issue remains a frozen labor market," said Heather Long, chief economist at Navy Federal Credit Union. "Americans don't think it's easy to find a job right now," she added in an email, noting that the share of consumers who said jobs are hard to find rose from 14.5% in January to nearly 19% this month.

Deeper insights:

Recent signs of a cooling labor market have prompted two Federal Reserve officials to signal openness to lowering key interest rates during their two-day monetary policy meeting, which concludes Wednesday.

Fed Governor Christopher Waller called on his colleagues to cut borrowing costs by 0.25 percentage points.

"Although the labor market looks fine on the surface, given expected data revisions, private-sector job growth has nearly stalled, and other data indicate increased downside risks to the labor market," Waller said in a speech on July 17.

"With inflation near target and limited upside risks, we should not wait for the labor market to deteriorate before cutting rates," he said. The central bank should eventually lower its benchmark rate to 3%—a level Fed officials consider "neutral" that neither slows nor stimulates economic growth.

Futures market traders almost entirely ruled out a rate cut on Wednesday, with a 97.9% probability that policymakers will hold the federal funds rate in the 4.25% to 4.5% range, according to the CME FedWatch tool. They expect a 62.8% probability of a 25-basis-point cut after Fed officials meet next on September 16-17.

Fed Chair Jerome Powell and other policymakers have chosen this year to hold off on further cuts to key rates until they are confident that the Trump administration's sudden tariff hikes will not reignite inflation. Central bank officials aim to bring inflation down to their 2% target.

Weakness in the labor market could prompt the next rate cut. Data from the Labor Department on Tuesday showed job openings fell in June from May, with the hiring rate dropping to 3.3%, one of the lowest levels since 2013.

The Conference Board said the share of consumers who said jobs are hard to find rose to 18.9% this month, up from 14.5% in January.

Increased U.S. import tariffs are also weighing on consumers' minds, said Stephanie Guichard, senior economist for global indicators at the Conference Board.

"Tariffs remain a top concern for consumers, often linked to worries that they will push prices higher," Guichard said.

In written survey responses, consumers' "mentions of high prices and inflation increased in July, although the average 12-month inflation expectation among consumers eased slightly to 5.8%, down from 5.9% in June and a peak of 7% in April," she said.