Consumer confidence strengthens despite cooling labor demand

REAL ECONOMY BLOG | October 29, 2024

Authored by RSM US LLP

The drop in job openings and the rebound in consumer confidence are consistent with a soft-landing scenario, which we believe has been the reality in recent months.

While the lower number of job vacancies signaled reduced demand pressure in September, hirings improved while job quits continued to stabilize. These are signs of a cooling yet resilient labor market that is moving towards normalization.

Job openings fell to 7.4 million, the fewest since 2021, from 7.86 million, while hirings rose to 5.56 million from 5.4 million according to the Bureau of Labor Statistics.

Despite some increasing concern about the cooling job market, consumers have largely maintained their job security, a key factor behind the sharp spike in confidence recorded in October. The confidence index rises to 108.7 from 99.2, the Conference Board reported on Tuesday.

The labor differential subindex, which closely tracks the unemployment rate, rose to a four-month high, suggesting that the unemployment rate should remain steady at 4.1% this month.

There might be some concerns that inflation expectations have picked up, yet we do not see these incremental increases as significant for the Federal Reserve at the moment, given that inflation appears stable.

Certainly, there are risks of the economy outperforming expectations, in our view, given the strength of consumer spending and the labor market. Still, the Fed should have ample options to steer the economy depending on what unfolds in the next couple of quarters.