Americans continue to feel increasingly pessimistic about the US economy.
New data from the University of Michigan out Friday showed consumer sentiment in March reached the lowest level since November 2022, with worries over inflation and the labor market dragging down optimism.
Friday’s report from the University of Michigan showed a particular worry from consumers about the labor market, with two-thirds of consumers expecting unemployment to rise in the year ahead, the highest reading since 2009.
Joanne Hsu, director for the survey of consumers, said in a statement that the labor market “trend reveals a key vulnerability for consumers, given that strong labor markets and incomes have been the primary source of strength supporting consumer spending in recent years.”
In February, the US economy added 151,000 jobs while the unemployment rate stood at 4.1%.
Still, some economists have argued this headline data is flattering the state of the US labor market.
In a note to clients published earlier this week, Neil Dutta, an economist at Renaissance Macro, wrote that “the US labor market continues to deteriorate with conditions worsening at the margin.” He noted weekly job postings and workers quitting are both falling, a sign of less demand for labor and less confidence among those with jobs.
The headline index of consumer sentiment hit 57 in March, down from a preliminary read of 57.9 reported two weeks ago and the lowest reading since the index hit 56.9 in November 2022.
An index measuring consumer expectations for the economy fell to 52.6, down from a prior reading of 54.2 and showing a further deterioration in consumers’ outlook for the economy.
Expectations for inflation over the next year jumped to 5% in March, the highest since November 2022 and up from 4.3% last month. For year-ahead expectations, all three political affiliations — Democrats, Republicans, and Independents — saw inflation moving higher.
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Longer-run inflation expectations, however, were driven by politics, Hsu noted.
“Long-run inflation expectations surged from 3.5% in February to 4.1% in March, reflecting from a large surge among independents plus a sizable rise among Republicans,” Hsu said.
“Here, as is the case for other measures from the Surveys of Consumers, aggregate trends are driven by and align closely with the views of independents, and thus are not being swung by polarization across the two major parties,” Hsu added.
