Spending Caution Sets In as Consumers Weigh Economic Outlook

The state and stability of one’s job — and by extension, earnings prospects — lies at the heart of consumers’ confidence over their own financial condition, both in the present and in the future.

Recent data — from both PYMNTS Intelligence and from surveys elsewhere about over consumer confidence — indicate that there’s a bit of bifurcation among the ways in which individuals and households are gauging their employment situations, and income. Lower income consumers, and those living paycheck to paycheck with issues paying bills, making their careers in various industries, are concerned about their employment, and the trend’s been in place for a while.

Last month, and as detailed in a report released by PYMNTS as part of our continued, extensive chronicling of the paycheck-to-paycheck economy, we found that consumers who found their take-home pay was just enough to meet expense obligations, or who were struggling to meet those obligations, were eyeing job opportunities as a way to improve their financial standing.

The fact that more than two-thirds of us live paycheck to paycheck means that worries over the ability to keep one’s job or to find a new one in the new year are pervasive.

As our data shows, overall, more than one-third of consumers say they have better prospects in the current environment and in the months ahead. But that leaves a majority who say that conditions are the same, or in fact worse than had been seen in the recent past. Similarly, only a third of consumers struggling to pay bills say the future looks brighter on the employment scene.

Some Career Paths Might Be Rocky

With a bit more granular insight, confidence is higher for workers that demand higher levels of specialized skills — where, for instance, 58% of tech workers say that job prospects are better now than they’ve been previously. But only about 31% of office-based occupation workers and 34% of those in customer-facing retail roles say that things are better than three years ago.

By income level, 27.9% of individuals making less than $50,000 annually think things are better now than three years ago; that sentiment rises to about 43% of those making more than $100,000.

And, as we found, 43% of those living paycheck to paycheck with trouble paying bills fear layoffs through 2025.

Confidence Dips in January

The cautionary mindset has persisted into January. Consumer confidence, as measured by the Conference Board in data released Tuesday (Jan. 28), indicated that the overall Index slipped by 5.4 points this month (which we note is not over yet) to 104.1.

Notable was the drop in the assessment of “present situations,” where that Index reading slipped by nearly 10 points on worsening expectations of the business and labor market conditions, and the “expectations” measure was also lower for those metrics.

While consumers’ views of both business conditions and job availability deteriorated, the most significant change was a drop in the number of consumers who said jobs were “plentiful” and a rise in those who found them “hard to get.” The Expectations Index, which reflects consumers’ short-term outlook on income, business  and labor market conditions, also fell in January — down by 2.6 points to 83.9 — but stayed above the threshold of 80 that often signals the onset of recession.

However, average 12-month inflation expectations rose to 5.3% from 5.1%, indicating that sticky inflation remains a concern. More than half of respondents also expect higher interest rates in the next 12 months, mirroring the Federal Reserve’s signals that rate cuts may slow in 2025.

On the spending front, intentions to purchase homes and cars were flat, while plans to buy other big-ticket items declined slightly.