Job Market Holds Steady, But Consumer Confidence Plummets: What This Means for Investors

The U.S. labor market remains resilient, with job openings and hiring holding steady in March 2025, but consumer confidence has nosedived to levels unseen since the early days of the pandemic. This divergence—stable employment but collapsing expectations—paints a worrisome picture for investors. Let’s unpack the data and its implications.

The Job Market: Hanging In, But Showing Cracks

The latest Job Openings and Labor Turnover Survey (JOLTS) for March 2025 shows 7.2 million job openings, a slight dip from February but a stark 901,000 decline from March 2024. While hires remain steady at 5.4 million, separations—including quits and layoffs—offer mixed signals. Quits fell to 3.3 million, but layoffs dropped in sectors like retail trade (-66,000) and federal government (-11,000). However, the April 2025 JOLTS data, due out on June 3, will reveal whether this softening persists.

Consumer Confidence: Freefalling into Recession Territory

The Conference Board’s April 2025 Consumer Confidence Index plummeted 7.9 points to 86—the lowest since May 2020—marking the fifth straight monthly decline. The Expectations Index, a key recession indicator, nosedived to 54.4, the lowest since October 2011. Only 15% of consumers expect income gains, while 32.1% anticipate fewer jobs ahead—a figure nearing Great Recession levels.

Tariffs and inflation are the culprits. Write-in responses to the survey cite tariffs as the top concern, with 48.5% of consumers fearing stock market declines and inflation expectations hitting 7%—the highest since November 2022. This pessimism is broad-based, hitting middle-aged households and high-income earners hardest.

Investor Takeaways: The Disconnect Between Now and Tomorrow

1. Consumer Discretionary Stocks at Risk
   Service-sector spending is collapsing, with dining-out intentions experiencing one of the largest monthly declines on record. Investors should avoid companies reliant on discretionary spending—think restaurants, travel, or luxury goods—until confidence rebounds.

2. Defensive Sectors: A Safer Bet
   Healthcare, utilities, and consumer staples may outperform as investors seek stability. The Consumer Staples Select Sector SPDR Fund (XLP), for example, has historically thrived during confidence slumps.

3. Monitor the Fed’s Response
   The Federal Reserve faces a dilemma: confidence is crumbling, but the job market isn’t yet in freefall. If the Fed holds rates steady or even hikes, it could exacerbate the downturn. Investors should watch for hints in the April jobs report and JOLTS data.

4. Preemptive Buying in Tech?
   While service spending is down, purchases of big-ticket items like appliances and electronics edged up—possibly as consumers stockpile before tariff-driven price hikes. This could favor tech hardware companies, but the risk of a broader spending pullback remains.

Conclusion: The Recession Clock Ticks Louder

The data is clear: consumer expectations are signaling a recession, with the Expectations Index below the critical 80 threshold for the first time since 2011. While the job market holds up for now, the 32.1% of consumers fearing fewer jobs and the 7% inflation expectations suggest this could unravel.

Investors should brace for volatility. The S&P 500’s (SPY) recent gains may stall unless confidence rebounds. The April JOLTS data in June will be critical: if job openings drop further, it could confirm the economy is cooling too fast. Until then, prioritize defensive stocks, avoid discretionary spending plays, and keep an eye on the Fed’s next move. The writing is on the wall—this isn’t just a temporary slump.

Data sources: Conference Board, Bureau of Labor Statistics, JOLTS report.