Sentiment gauge drops 3.7 points in September as job market differential signals weakening employment conditions
American consumers are growing increasingly uneasy about their economic prospects, with confidence indicators sliding for the third time in four months as labor market conditions continue to soften. The Conference Board’s consumer confidence index fell 3.7 points in September, marking the sharpest decline in recent months and bringing the measure to its lowest level since April, according to a report from Wells Fargo Economics. The downturn in sentiment comes even as actual consumer spending data shows continued resilience, creating a disconnect between how Americans feel and how they behave. Recent revisions to second-quarter GDP figures revealed stronger economic growth than initially reported, with much of the upward adjustment attributed to robust spending on services.
“If you are struggling to square survey-based measures of lost swagger with still solid hard data on consumer spending, it helps to think of consumer psyche in the context of lost momentum in the labor market,” the report stated.
Both components of the confidence index deteriorated in September. Consumers’ assessment of current conditions and their expectations for the next 12 months have now fallen to levels that historically preceded economic downturns, though Wells Fargo maintains that a recession is not imminent.
The key to understanding consumer anxiety lies in employment trends. The labor market differential—which measures the gap between consumers who say jobs are plentiful and those who say jobs are hard to get—has been declining steadily over the past two years. This gauge has proven more reliable than headline confidence numbers in capturing the actual state of consumer sentiment, according to the Wells Fargo analysis.
Earlier in 2025, the weakening labor differential coincided with rising inflation expectations, a combination that complicated the Federal Reserve’s policy decisions. September’s report offered at least one positive development: inflation expectations cooled notably, with the average expectation for the next 12 months dipping below 6 percent and the median falling below 5 percent. While both figures remain well above the Fed’s 2 percent target, they represent progress from earlier peaks.
The easing of inflation concerns could support the Federal Reserve’s approach to interest rate policy. Combined with expectations for more accommodative fiscal policy in 2026, lower borrowing costs may help stabilize consumer fundamentals heading into next year, potentially reversing the current trend of declining confidence. The current environment reflects broader uncertainty stemming from ongoing trade tensions and tariff policies that have made economic forecasting more difficult throughout 2025. Data revisions have become more frequent and substantial, complicating efforts to assess the economy’s true trajectory.
For now, the divide between sentiment and spending persists. While consumers express growing worry about their economic situation, they continue to open their wallets at a steady pace. Whether this behavior can continue as labor market conditions soften remains an open question for the months ahead.
