Confidence in job market sees biggest drop since March 2020

Economic sentiment dropped again over the past two weeks as unease about the banking system persisted. The Penta-CivicScience Economic Sentiment Index (ESI) fell 1.9 points to 33.3, the largest drop in the overall index since July 2022. Leading the decline was a collapse in confidence in find a new job—an especially notable development since confidence in the labor market had remained largely resilient over the past six months, even as some other indicators lagged.

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All five of the ESI’s indicators decreased over the past two weeks. Confidence in finding a new job dropped a drastic 5.3 points to 36.9—tied with March 2020 (the onset of COVID lockdowns in the U.S.) for its largest single-reading decrease ever. 

—Confidence in buying a new home fell 1.9 points to 22.3.

—Confidence in personal finances fell 1.7 points to 51.6.

—Confidence in the overall U.S. economy fell 0.5 points to 32.5.

—Confidence in making a major purchase fell 0.1 points to 23.2.

A wave of layoffs over the past two weeks has expanded beyond the tech industry. Amazon, Accenture, LinkedIn, Walmart, and others all announced they would be cutting jobs—with Accenture cutting 2.5% of its total workforce and LinkedIn about 15% of its staff. Recent issues in the banking sector could cause further loosening in the job market, with Fed Chair Jerome Powell telling reporters that “the events of the last two weeks are likely to result in some tightening of credit conditions for households and businesses, and thereby weigh on demand on the labor market and inflation.”  

The substantial drop in confidence in finding a new job has coincided with the collapse of multiple banks and the resulting fallout over the past two weeks. The KBW bank index, which tracks the performance of 24 U.S. banks, fell more than 5% and has lost over 20% of its value this year compared to the small increase in the broader market over the same period. This crisis has renewed concerns of a recession for some experts, including Jay Bryson, chief economist at Wells Fargo, who noted that he “would raise the probability of a recession given what’s happened in the last week.”

Mortgage rates continued to fall as the Fed announced another quarter-point rate hike on March 22. However, there was also improved purchase demand and stabilizing home prices. A geographic divide has emerged in the housing market, with home prices falling in the western United States and rising in the eastern U.S. This trend reflects the impact of COVID-19, as people are increasingly deciding to leave “Zoom towns”—areas that saw population growth during the pandemic.  

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The ESI’s three-day moving average began this two-week stretch at 33.9 on March 15. It then fell to 33.7 on March 16 before rising to 33.9 on March 17. After another dip on March 18 and 19, the three-day average trended upward to 34.1 on March 22. The three-day average then fell to a low of 31.6 on March 24 before rising to a peak of 35.0 on March 28 to close out the session.

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The next release of the ESI will be Wednesday, April 12, 2023.

Consumer sentiment drops in wake of SVB collapse

Economic sentiment dropped in a two-week span that saw the failures of three U.S. banks, driven by a significant fall in confidence in the overall U.S. economy. The Penta-CivicScience Economic Sentiment Index (ESI) fell 1.3 points to 35.2, its largest fall since mid-October.

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Four of the ESI’s five indicators decreased over the past two weeks. Confidence in the overall U.S. economy dropped 2.9 points to 33.0—its largest single-reading decrease since June 2022.

—Confidence in personal finances fell 1.9 points to 53.3.

—Confidence in finding a new job fell 1.1 points to 42.2.

—Confidence in making a major purchase fell 0.7 points to 23.3.

—Confidence in buying a new home rose 0.2 points to 24.2.

Confidence in the overall U.S. economy fell as the U.S. was rocked by three bank closures. Silvergate Capital, a central lender to the crypto industry, announced on March 8 that it would be winding down operations and liquidating its bank. That news was followed by the collapse of Silicon Valley Bank (SVB)—a critical player for tech startups and a top-20 U.S. bank by assets—which became the biggest American bank to fail since the collapse of Washington Mutual in 2008. On Sunday, March 12, another major bank was shuttered when regulators closed Signature Bank, which was facing a crisis of confidence after SVB collapsed. 

The unemployment rate increased but remained low—rising to 3.6% in February from 3.4% in January. Despite this, Chair Jerome Powell’s comments that the Federal Reserve could increase the size of its interest rate hikes and raise borrowing costs to higher levels than previously projected, along with the slowing wage growth, are likely driving concern with the job market.  

The extent to which Powell’s statements come to fruition will largely be determined by the fallout of SVB’s collapse and the resultant risks influencing the U.S. banking system. Goldman Sachs and Barclays, among others, now expect the Fed to hold rates steady following its meeting on March 22 as a result of the recent volatility. 

Others predict the Fed will raise interest rates by a quarter point, which would still represent a lower increase than originally anticipated. This outcome may be more likely given the latest release of the Consumer Price Index (CPI), which increased by 0.4% in February and 6.0% annually—indicating the slowest annual increase in inflation since September 2021.

The rapid bank failures also caused stocks to tumble over concerns about what might collapse next. As of Friday, March 10, the S&P 500 dropped 1.4% to cap its worst week since September, the Dow Jones Industrial Average fell 1.1%, and the Nasdaq composite sank 1.8%.
The labor market continued to grow in February, with employers adding 311,000 jobs, down slightly from the average of 344,000 over the previous three months. While job growth remained strong, wage growth only increased 0.2% from January.

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The ESI’s three-day moving average began this two-week stretch at 34.1 on March 1. It then rose to a peak of 37.4 on March 7 before falling to 34.9 on March 10, the day SVB failed. The three-day average then trended upward to 35.3 on March 11 before it to a low of 33.4 on March 14 to close out the session—coinciding with Silvergate’s March 12 announcement that it would be liquidating the bank helped drive.

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The next release of the ESI will be Wednesday, March 29, 2023.

Economic sentiment falls after last reading’s record bump

Economic sentiment slightly decreased over the past two weeks. The Penta-CivicScience Economic Sentiment Index (ESI) fell 0.4 points to 36.5. 

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Three of the ESI’s five indicators decreased over the past two weeks. Confidence in personal finances fell the most, dropping 1.6 points to 55.2.

—Confidence in the overall U.S. economy fell 1.2 points to 35.9, its largest drop of 2023.

—Confidence in buying a new home fell 0.9 points to 24.0.

—Confidence in making a major purchase rose 0.6 points to 24.0.

—Confidence in finding a new job rose 1.0 points to 43.3.

Confidence in the overall U.S. economy fell as U.S. stocks had their worst weekly performance of the year the week of February 19, with the S&P 500 decreasing 2.7%, the Nasdaq dropping 3.3%, and the Dow falling 3%.

Consumers also saw the average rate on a 30-year fixed mortgage surge to 6.96% from 6.73% the week of February 26, marking the third consecutive week of significant mortgage rate increases. 

According to a report from Fannie Mae, volumes of both new and existing home sales are predicted to fall 5.4% and 19.2% respectively as the firm expects high mortgage rates to continue to keep many buyers sidelined.

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Spotlight on personal savings: Confidence in personal finances and Americans’ personal savings rate have moved close to lockstep since June of last year. The savings rate has been increasing over the past few months and sits at 4.7% as of January 2023. However, it is still drastically lower than the mark of 9.3% in February 2020. Despite the rise in the savings rate, which has also been accompanied by increases in personal disposable income, credit card debt exceeds savings for more than a third (36%) of U.S. adults.  

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The ESI’s three-day moving average began this two-week stretch at 35.8 on February 15. It then rose to a peak of 39.6 on February 19 before falling to 35.5 on February 22. The three-day average then trended upward to 37.4 on February 24, before falling to a low of 34.3 on February 28 to close out the session.

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The next release of the ESI will be Wednesday, March 15, 2023.

Economic sentiment jumps sharply, reaching highest level since March 2022

Economic sentiment increased sharply over the past two weeks. The Penta-CivicScience Economic Sentiment Index (ESI) rose 2.0 points to 36.9, the largest single-reading increase since July 2022 and highest reading since March 2022.

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All five of the ESI’s indicators increased over the past two weeks, the first time all indicators have moved in positive unison since November 2022. Confidence in buying a new home improved the most, increasing 2.5 points to 24.9.

—Confidence in personal finances rose 2.4 points to 56.8.

—Confidence in finding a new job rose 1.9 points to 42.3

—Confidence in making a major purchase rose 1.5 points to 23.4.

—Confidence in the overall U.S. economy rose 1.4 points to 37.1.

Confidence in buying a new home jumped as the average rate on the 30-year fixed rate mortgage fell to 5.99% on February 2, the first time it has dropped below 6.0% since early September. 

The release of the Bureau of Labor Statistics’s January job report showed employment rose by 517,000 in January 2023—blowing out economists’ estimates that just 185,000 jobs would be added. The strong labor market and improving outlook on inflation have led some—such as Goldman Sachs CEO David Solomon—to believe that avoiding a recession and achieving a soft landing remains possible. 

The jobs report came on the heels of the Federal Reserve unanimously approving a quarter-point interest rate hike on February 1, the smallest increase since March 2022 and a potential sign that the central bank is seeing progress in its efforts to combat inflation.

However, the fight to curtail inflation is far from over. New data from the Labor Department revealed inflation rose by 0.5% in January 2023, a significant jump from December’s 0.1% increase. This hike, coupled with the highest reading of the Consumer Price Index since October 2022, reflects that inflation’s decline will not always be linear.

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The ESI’s three-day moving average began this two-week stretch at a low of 34.9 on February 1 and 2. It then trended upward, rising to 36.4 on February 4 before falling to 35.9 on February 5. The three-day average then trended upward to a peak of 38.5 on February 12, before falling to 37.4 on February 14 to close out the session.

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The next release of the ESI will be Wednesday, March 1, 2023.

Economic sentiment falls as consumer spending slows

Economic sentiment continued to decrease over the past two weeks, with confidence in personal finances leading the drop. The Penta-CivicScience Economic Sentiment Index (ESI) fell 0.3 points to 34.9 in its most recent reading.

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Three of the ESI’s five indicators decreased over the past two weeks. Confidence in personal finances fell 1.9 points to 54.4, its largest decrease since August 2022.

–Confidence in finding a new job fell 1.1 points to 40.4.
–Confidence in the U.S. economy fell 0.3 points to 35.7
–Confidence in making a major purchase rose 0.6 points to 21.9, the highest it’s been since April 2022.
–Confidence in buying a new home rose 1.2 points to 22.4.

Confidence in personal finances decreased as Americans’ pandemic-era savings are dwindling after a period of increased consumer spending. The share of monthly income Americans set aside for savings fell to 3.4% in December 2022 from 7.5% in December 2021. This shift reflects the impact of enduring inflation and consistent interest rate hikes.

Interest rates are expected to rise again following Wednesday’s Federal Reserve meeting. The upcoming hike in the federal funds rate will likely be smaller than other recent increases (with most analysts predicting a 25 basis-point increase). Consumers are already feeling the effects of rate hikes in a variety of ways: APRs on credit cards, for example, now exceed 19%, on average—an all-time high.

Confidence in finding a new job also declined, as layoffs persist throughout the tech industry and experts predict hiring will continue to slow in 2023. This drop comes ahead of the Labor Department’s report on the state of the U.S. job market in January, set to release this Friday.

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The ESI’s three-day moving average began this two-week stretch at a peak of 36.96 on January 18. It then trended downward, briefly rising to 36.8 on January 20 before hitting a low of 32.7 on January 23. The three-day average then trended upward to a 36.4 on January 28, before falling to 33.7 on January 31 to close out the session.

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The next release of the ESI will be Wednesday, February 15, 2023.