Americans’ attitudes toward the economy soured in February after a three-month streak of improving moods, according to The Conference Board’s latest consumer survey released Tuesday.
The survey’s index fell in February to 106.7, down from a reading of 110.9 in January. Americans became less worried about rising food and gas prices, but more concerned about the job market, the survey showed.
“The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000,” Dana Peterson, chief economist at The Conference Board, said in a release. “Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 54.”
Americans’ outlook for the economy in the following months, including their expectations for income and business conditions, declined this month, slipping below a threshold that “often signals recession ahead,” according to the report.
Inflation expectations for the year ahead edged lower this month to 5.2%, well below a peak of 7.9% in mid-2022 when inflation was running at its fastest pace in four decades, according to the survey.
While the survey showed waning concerns over inflation, it captured rising worries over the job market. A similar survey by the University of Michigan released earlier this month showed that Americans’ moods held steady in February, though a second estimate is due later this week.
Respondents of the survey also expressed some concerns over “the US political environment,” Peterson said.
“The [job] market is still strong, it’s just much less strong than a year ago when job swapping for higher pay was easy,” Robert Frick, corporate economist with Navy Federal Credit Union, said in a note Tuesday. “And now the contentious election season is coming closer into view, and national elections strongly influence perceptions of the economy.”
By many measures, the US economy remains on strong footing, including the labor market.
Economic growth registered at a strong 3.3% annualized rate in the fourth quarter, according to Commerce Department data, and is on track to remain north of 3% in the first three months of this year, the Atlanta Fed is currently projecting.
Meanwhile, data on hiring, job openings and layoffs all indicate that America’s job market remains solid. Employers added 353,000 jobs in January as the unemployment rate held steady at 3.7%. Job openings remain above anything seen before the Covid-19 pandemic and new applications for unemployment benefits are still at historically low levels.
That’s not to say that Americans aren’t under pressure. Interest rates remain at a 23-year high as Federal Reserve officials signal that they won’t start cutting interest rates this spring. Housing affordability, which factors in mortgage rates, remains painfully low, impacting young Americans.
“With inflation running above target, labor markets tight, and demand showing considerable momentum, my own view is that there is no need to preemptively adjust the stance of policy,” Federal Reserve Bank of Kansas City President Jeffrey Schmid said Monday at an event in Oklahoma City, which was his first major speech since taking the reins six months ago.
Economists widely expect growth to slow this year, but not fall off a cliff. In fact, more economists and investors now believe the economy is expected to remain intact as inflation reaches the Fed’s 2% target. Analysts call that scenario a “soft landing.”
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