U.S. year-end peak approaching…consumer sentiment at 7-month low, employment also worsening

Clear slowdown in consumption…major economic indicators 'warning lights'

November consumer confidence drops sharply

September retail sales also at a four-month low

Wallets closed as year-end discounts shrink

Private employment falls by 13,500 per week

HP "will cut up to 6,000 jobs"

Consumer sentiment in the U.S. has contracted to its worst level in seven months ahead of the year-end shopping season, including Black Friday. With tariffs prompting companies to reduce discount sizes, the likelihood of a slowdown in consumer activity has increased, and the labor market is also weakening.

◇ Retail sales growth at a four-month low

Private research firm The Conference Board said on the 25th (local time) that the U.S. November consumer confidence index recorded 88.7, a sharp decline from the previous month (95.5). It is the lowest in seven months since the U.S. administration announced reciprocal tariff plans in April, and excluding April, it is the second-lowest level in the past five years. The share of consumers who said the "economy is good" was 20.1%, and the share who said "jobs are plentiful" was only 27.6%. In October, these figures were 20.7% and 28.6%, respectively. The previously released University of Michigan consumer sentiment index was also the lowest since June 2022.

The U.S. Department of Commerce said that September retail sales increased only 0.2% month-on-month. This is the lowest growth rate in four months since retail sales turned negative in May following the reciprocal tariff announcement. Analysts attribute this to a clear contraction in spending on items hit by tariff burdens such as automobiles, electronics, and clothing.

Against this backdrop, the U.S. is expected to see lower consumer spending during the year-end shopping season starting with Black Friday on the 28th. The National Retail Federation expects 186.9 million people to shop over the five days from Black Friday through Cyber Monday (December 1). While larger than last year's 183.4 million, average year-end spending per person is expected to fall to $890 (about 1.3 million won) from $902 last year.

Analysts say this is because consumers' purchasing power has weakened and discounts this year are smaller than usual. In the past, stores like Kohl's, J.C. Penney, and Macy's lowered prices on small kitchen appliances to the $5 range using coupons and rebates, but most of those extreme discounts have disappeared this year. Lydia Boussour, lead economist at EY-Parthenon, said, "Economic prospects are deteriorating ahead of the year-end shopping season," adding, "With prices rising again and the labor market cooling, households' real purchasing power is weakening."

◇ Employment slowdown and renewed price pressures

Current consumer price inflation is around 3%, lower than the 2022 peak (9%), but cumulative price increases over the past five years have placed a significant burden on low-income households. Slower wage growth for lower-income groups and a cooling labor market have compounded the pressure.

The U.S. Department of Labor reported that the producer price index (PPI) for September rose 0.3% month-on-month, rebounding from August (-0.1%), suggesting wholesale prices are picking up again. Since the PPI is a leading indicator for consumer prices, upward pressure on consumer inflation could increase.

Labor market cooling is also becoming evident. U.S. employment firm ADP reported that private employment fell by an average of 13,500 people per week over the four weeks ending on the 8th. ADP explained, "Ahead of the year-end hiring season, companies may be postponing or scaling back hiring."

Major U.S. companies are already announcing cuts. PC and printer maker HP reportedly plans to restructure 4,000~6,000 employees after warning that this year's profits will fall short of market expectations. This could lead to layoffs of more than 10% of its roughly 58,000 global employees. Verizon, the largest U.S. wireless carrier, plans to cut 15,000 jobs, and Amazon said last month it would restructure 14,000 positions. Employment data firm Challenger, Gray & Christmas (CG&C) released a report earlier this month showing cumulative announced layoffs from January to October this year surged 65% year-on-year to 1,099,500.

With a cooling labor market and ongoing price pressures, the outlook for the Federal Reserve's December policy rate is uncertain. Within the Fed, both views advocating a rate cut and those favoring a hold are emerging.

Im Dayeon/Reporter / New York = Park Shin-young, Correspondent allopen@hankyung.com