U.S. consumer confidence falls to a five-month low as government shutdown risks increase, complicating Federal Reserve decision-making

According to the latest data released by the Conference Board on Tuesday, the Consumer Confidence Index fell to 94.2 in September, a decrease of 3.6 points from August and significantly below the market expectation of 96. This reading not only marks the lowest level since April but also highlights the increasingly fragile consumer sentiment amid a weakening job market, persistent high inflation, and the looming risk of a government shutdown.

The Conference Board report indicates a significant deterioration in consumers' assessment of the "present situation," with a sharp decline in the evaluation of the business environment and continued pessimism regarding the job market. The index measuring the "present situation" has dropped to a one-year low, showing that public confidence in the current economic state is rapidly waning. Specifically, the proportion of respondents who believe job opportunities are "plentiful" has fallen to 26.9%, a decrease of more than 3 percentage points from the previous month, while the percentage of those who find jobs "hard to get" remains at 19.1%.

Senior economist Stephanie Guichard from the Conference Board pointed out that consumers' judgments about business conditions have clearly weakened in recent months, and perceptions of job opportunities have deteriorated for nine consecutive months, reaching a multi-year low. This situation corresponds with the reality of a slowing economic recovery in the U.S. and pressure on household spending.

On Tuesday, the latest data from the Labor Department showed that job vacancies in the U.S. slightly increased to 7.23 million in August. However, on a year-over-year basis, job vacancies decreased by 422,000, a decline of 5.5%. This indicates that the job market has generally retreated from its peak, with a decrease in corporate hiring demand.

At the same time, labor mobility has weakened. The number of resignations in August decreased by 75,000. The resignation rate is typically seen as an indicator of workers' confidence in finding new jobs, and its decline reflects a reduced willingness among workers to change jobs, further indicating a tightening market environment.

Chairman Powell previously emphasized that signs of weakness are emerging in the U.S. labor market when announcing the interest rate cut earlier this month. He mentioned that if companies continue to reduce hiring, it could lead to a slowdown or even a halt in job growth. Nevertheless, views within the Federal Reserve regarding the situation are not entirely uniform. Boston Fed President Collins stated on Tuesday that her baseline forecast does not anticipate a significant deterioration in the labor market, but she acknowledged the potential risks of insufficient labor demand and rising unemployment.

As economic data sends mixed signals, the Federal Reserve's policy path has become more sensitive. The market generally expects the Fed to cut interest rates by 25 basis points in both October and December, totaling a 50 basis point reduction for the year. However, officials' statements indicate that they are maintaining a cautious balance between addressing inflation and employment.

Currently, the U.S. inflation rate remains above the Fed's long-term target of 2%, partly due to the impact of the Trump administration's large-scale tariff policies. Some officials believe that the price shocks from tariffs may have been largely absorbed, but the risks have not been completely eliminated. At the same time, signs of weakness in the labor market have intensified the necessity for rate cuts. Collins emphasized that moderately maintaining a "mild tightening" monetary policy stance would help restore price stability while avoiding further deterioration in the job market.

Mike Reid, a senior economist at the Royal Bank of Canada, noted in a research report: "In a data-dependent environment, if the Fed cannot obtain complete economic data for September, the likelihood of pausing rate cuts in October will significantly increase." What is even more concerning is that the risk of a government shutdown in the United States is approaching. If Congress cannot pass a temporary funding bill by midnight on September 30, a large number of non-essential government agencies will be forced to shut down. The three major statistical agencies in the U.S., the Bureau of Labor Statistics (BLS), the Bureau of Economic Analysis (BEA), and the Census Bureau, have clearly stated that if the government shuts down, the release of economic data will be suspended. This means that the market and policymakers will face a "data vacuum."

If the deadlock cannot be resolved, the non-farm payroll report for September, originally scheduled to be released this Friday, will be delayed, and key data such as retail sales, the Consumer Price Index (CPI), and the Producer Price Index (PPI) may also be postponed. This data is crucial for the Federal Reserve in formulating monetary policy, and its absence will weaken the central bank's judgment. Historical experience shows that during the 16-day government shutdown in October 2013, the BLS employment report was delayed until the 22nd of that month.

In Washington, the standoff between Democrats and Republicans over budget issues remains sharp. House Democratic leader Hakeem Jeffries criticized Republicans for cutting healthcare funding on the steps of Capitol Hill on Tuesday, emphasizing, "We are here to save the healthcare of the American people." He called for the cancellation of cuts, cost reductions, and the assurance of healthcare services, increasing public pressure with the voices of cancer survivors and nurses.

On that day, although the House did not formally convene, Democrats planned to push for a vote on their preferred funding bill during a brief formal meeting. In the Senate, both parties also held press conferences after their respective caucus luncheons to showcase their differing positions. In the evening, the Senate will vote on different versions of the temporary funding bill, but it will be extremely difficult to gain bipartisan support of 60 votes.

As there are currently no meeting arrangements between the White House and congressional leadership, President Trump's role has become crucial in determining whether a compromise can be reached at the last moment. Even if a "technical shutdown" occurs after midnight, Congress may still quickly take measures to restore government operations, but the political risks of a prolonged deadlock and the market impact cannot be underestimated