By Tom Ozimek
U.S. consumers grew more hopeful about their future financial prospects in December and edged away from worst-case recession fears, even as overall confidence slipped for a fifth straight month, according to a Dec. 23 report from the The Conference Board.
The Conference Board’s Consumer Confidence Index fell 3.8 points, to 89.1 in December, down from a revised 92.9 in November, reflecting weaker views of current business and labor market conditions. But beneath the headline decline, forward-looking indicators pointed to improving household sentiment, easing inflation anxiety, and a more constructive outlook for markets heading into 2026.
Expectations for families’ future financial situations climbed to their most positive level since January, even as assessments of current finances turned negative for the first time in nearly four years. At the same time, consumers became more optimistic about stock prices, while inflation expectations pulled back following a November uptick.
“The responses continued to skew pessimistic but less so than November,” said Dana Peterson, chief economist at The Conference Board, citing fewer negative comments about prices, inflation, and politics, alongside a rebound in positive sentiment around interest rates following the Federal Reserve’s third rate cut of the year.
The improving forward-looking sentiment comes amid stronger-than-expected economic growth. Real gross domestic product increased at a 4.3 percent annual rate in the third quarter, driven by robust consumer spending and a rebound in exports, according to recently released government data.
Confidence Dips, Outlook Stabilizes
The Conference Board’s Present Situation Index—which measures consumers’ assessment of current business and labor market conditions—fell sharply by 9.5 points, to 116.8, as views on business conditions turned negative for the first time since September 2024. The share of consumers describing jobs as “plentiful” declined to 26.7 percent from 28.2 percent in November, while those saying jobs are “hard to get” ticked up by 0.7 points, to 20.8 percent.
By contrast, the forward-looking Expectations Index held steady at 70.7. While still below the 80 threshold that historically signals recession risk, the stability marked a pause after months of deterioration. Consumers grew moderately less pessimistic about business conditions six months ahead, with fewer respondents expecting conditions to worsen.
Recession fears also eased at the margins. The share of consumers saying a U.S. recession over the next 12 months is “very likely” continued to decline, while those saying a downturn is “not likely” edged higher. The largest share still expects a recession to be “somewhat likely,” but outright alarm has receded from earlier in the year.
Labor Market Signals Mixed
The survey’s cautious tone on jobs aligns with mixed but resilient labor market data released this week. Initial jobless claims fell for a second straight week, declining by 10,000 to 214,000 for the week ending Dec. 20, according to the Department of Labor. The reading came in below economists’ expectations and pushed the four-week moving average slightly lower.
Continuing claims, however, climbed back above 1.9 million, pointing to ongoing challenges for unemployed workers seeking new jobs. The long-term unemployment rate also edged higher in November, reinforcing concerns that hiring remains selective.
Claims data have been volatile amid holiday distortions and the effects of a prolonged government shutdown, but economists say the trend still points to a labor market that is cooling gradually rather than cracking.
“Continued claims remain at a level consistent with a slow pace of hiring but aren’t sending a signal that hiring conditions have gotten worse,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
The labor market remains locked in what some economists and policymakers have characterized as a “no hire, no fire” mode.
“Unless companies actually fire workers, the economy will continue to move forward at a moderate pace,” said Christopher Rupkey, chief economist at FWDBONDS.
Private payroll data suggest hiring momentum has slowed—but not stalled. U.S. private companies added an average of 11,500 jobs per week in the four weeks ended Dec. 6, marking the third straight period of gains, according to payroll processor ADP.
Inflation Cools, Markets Brighten
Inflation trends continue to support the improving outlook on household finances. Consumer inflation eased to 2.7 percent in November, while core inflation slowed to 2.6 percent—the lowest reading since early 2021—bolstering expectations that price pressures may have peaked.
In the Conference Board survey, consumers’ median and average 12-month inflation expectations both declined in December. Expectations for stock prices over the next year turned the most positive since January 2025, reflecting growing confidence that rate cuts and easing inflation could support markets.
The Federal Reserve lowered interest rates for a third time in 2025 earlier this month, and policymakers have increasingly signaled greater concern about labor market softness than inflation risks. Futures markets are betting on additional rate cuts in 2026, even as the Fed has penciled in a more cautious path.
Reuters contributed to this report.
