Consumers Felt Slightly Worse About The Economy In February

A widely-watched measure of consumer sentiment fell slightly in February, headed south but doing little to reverse the recent trend of growing optimism about the economy as inflation cools.

The University of Michigan’s Index of Consumer Sentiment fell to 76.9 in February from 79 in January, the university said Friday. That’s moving in the other direction than a preliminary survey suggested in mid-February and is eight points below the index’s historical average.

“Consumers perceived few changes in the state of the economy since the start of the new year, and they appear to be assured that inflation will continue on a favorable trajectory,” the university’s surveys of consumers director Joanne Hsu said in a blog post about the data.

The index is based on a poll of U.S. households asking people how they feel about the economy and their own finances. Economists watch consumer sentiment measures to gauge how willing people are to spend money—a key bit of information considering consumer spending is the main engine of economic growth.

Consumer sentiment plunged in 2022 as inflation surged out of control, but has rebounded in recent months as consumer price increases have slowed.

Unemployment Rate Rose in February, Wage Growth Slows

The unemployment rate rose to the highest since January 2022, as high interest rates dragged on the economy. The Bureau of Labor Statistics said Friday that unemployment grew to 3.9% in February, up from 3.7% in January. It was higher than economists expected. Wages grew at the slowest rate in two years, as workers' upper hand in the market may be slipping. Slower job growth could encourage officials at the Federal Reserve to lower its benchmark interest rate sooner rather than later, hoping to avoid a recession and mass layoffs.

Investors' expectations of a rate cut in May sat at 26.6% before the jobs report, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data. Afterward, it was up to as high as 30% but has normalized some since.

Read more about the details of the job report here.