Americans’ financial confidence remains even, but growing anxiety is beginning to underpin it.
Though consumer confidence remains steady in the latest Forbes Advisor-Ipsos Consumer Confidence Biweekly Tracker, two areas of focus provide a clearer picture of how Americans are really feeling about their financial outlook.
The jobs index, which measures job security confidence and employment outlook, gained two points this week, rising to 68.1 (out of 100). That’s extraordinarily healthy compared to early April 2020, it had plunged to about 47.
But the expectations index, which charts respondents’ outlook on their personal financial situation, declined 1.6 points from two weeks prior.
The survey, conducted by Ipsos, measures consumer sentiment over time.
Though overall consumer confidence has declined slightly over the past few months, it’s been a gradual change—and sentiment is still only about a half-point below the historical average for Ipsos’ metric. That means that despite continued inflation, Americans are still seeing bright spots in their financial situations.
Jobs: A Sunny Spot in a Dimming Outlook
With its increase from two weeks ago, the jobs index reached its highest point in eight months.
Only 22% of respondents said they, a family member or friend lost their job in the past six months because of the economy—down five points from two weeks ago and eight points from a month ago.
Though 37% say it’s likely they or someone they know will lose their job due to economic conditions in the next six months, that’s down two points from the last survey.
“It’s still a job-seeker’s market,” says Robert Frick, corporate economist for Navy Federal Credit Union, who sees conditions holding out through the end of the year. Job openings are still at a near-record high, per the latest Job Openings and Labor Turnover (JOLTS) report from the Bureau of Labor Statistics, and layoffs are well below pre-pandemic levels.
The job market is so tight right now, Frick says, that “employers are holding onto people they even want to fire.”
But Nick Bunker, director of economic research at Indeed Hiring Lab, warns that though workers have leverage in the labor market now, this is probably as good as it’s going to get.
“The labor market continues to benefit job seekers as employers work hard to hire and retain employees,” he said in a statement. “However, this year is very unlikely to see the rapid improvements of last year.”
Consumers Preparing Finances for the Unknown
The latest data from Ipsos shows consumers are beginning to change their financial habits.
Only 19% of people said they’re spending more money than usual, a decrease of 6 percentage points from one month ago. This may partly be due to high inflationary costs on everyday goods like groceries and gas being the new normal, rather than consumers feeling fresh sticker shock at the cash register.
Read more: What Are Inflation Expectations?
And this week, 38% of respondents said they’re investing or saving less than usual. Six months ago, only 30% said they had pulled back on saving. They may be foregoing savings to free up cash for their needs right now.
The Federal Reserve began to raise federal rates in March to chip away at continued high inflation and will likely raise them again in June and July. However, Frick says it’ll still be a while until consumers see relief from high prices.
Now, he says, is the time to focus on reducing consumer debt, before credit card and auto loan rates begin to rise in earnest. Only 10% of Ipsos respondents said they’re paying their credit card or other debt more than usual; last month, 14% said they were.
“It’s better to make changes now before there’s a big rush to get a lower rate or do a zero-balance transfer,” Frick says. If you haven’t considered refinancing your auto loan, he advises doing so now. “You have more options [to do so] now than you will at the end of the year,” he says.
Read more: The Best Balance Transfer Cards of 2022
But Frick also acknowledges that the K-shaped recovery continues, with lower-income Americans still making up for losses suffered during the pandemic. “There are a ton of openings, but there are still a lot of people who want to go back to work but can’t,” Frick says, due to lack of child care or medical help for family members.
As the Fed raises rates to cool the economy, he explains, and hiring in child care and health care evens out, it will become more sustainable for would-be employees to return to the workforce, adding income to their households. “Even with financial pressure, if you can get from one income to two, things look a lot brighter,” he says.
Though a recession could throw cold water on that recovery, it’s too early to know the long-term impact of today’s financial adjustments.
Survey methodology: Ipsos, which surveyed 919 respondents online on May 31 and June 1, 2022, provided the results exclusively to Forbes Advisor. The survey is conducted weekly to track consumer sentiment over time, using a series of 11 questions to determine whether consumers feel positively or negatively about the current state of the economy and where it looks to be going in the future.
