Consumer sentiment remains stubbornly depressed six years after the pandemic despite solid economic indicators and heavy spending.
Six years after the COVID-19 pandemic reshaped global commerce, consumer sentiment hasn’t climbed back to pre-pandemic levels, according to data from the University of Michigan Consumer Sentiment Index. The Conference Board’s Consumer Confidence Index also dropped in September, running counter to objective measures of economic strength such as employment and spending.
Why Sentiment Diverges From Resilient Consumer Spending
The gap between downbeat public mood and strong economic output presents a post-pandemic riddle for economists. Historically, consumer sentiment served as a fairly reliable leading indicator of where the economy was headed, operating on the premise that if the consumer feels confident and optimistic, they’ll spend more. Consumer spending accounts for about 70% of the U.S. economy, making the current disconnect unusual.
Economists and policymakers are moving past the monthly malaise to examine hard data instead.
When subjective measures stray from their historical roles, Chicago Fed economists rely more on quantifiable, objective statistics such as inflation, spending, hiring, and economic growth. The personal consumption expenditures price index indicates that price increases stabilized while consumers continued to spend heavily. Consumer spending in August surged 0.9% from July. Adjusted for inflation, spending grew 0.6%, marking its strongest monthly gain since March 2025.
Sticker Shock Over Prices, Housing, and Wealth Inequality
Households are dealing with rapid price increases that outpace their memory of lower costs. Consumer prices are up 30% since the start of 2020, and the cost of major purchases like automobiles and housing creates jarring sticker shock. Daily necessities including rent, groceries, energy, insurance, and medical expenses have escalated beyond the average inflation rate, while gas prices are pushing $5 nationally.
Housing market dynamics leave many feeling trapped in their current homes due to a reluctance to trade low mortgage rates for borrowing costs like 7.5%. At the same time, wealth inequality continues to draw attention, with the top 0.1% controlling 15% of household net worth in America, up from 8.6% in 1989. Political polarization, social media sensationalism, and energy shocks driven by war compound the widespread frustration.
The Shift to Online Surveys and What the Underlying Data Shows
Methodological changes in survey collection may also explain the lows in consumer sentiment.
Deeper dives into survey distributions rather than median figures reveal concentration patterns.
The Labor Market Enters a Low-Hire, Low-Fire Phase
The Labor Department’s monthly jobs report for September showed softening payroll growth, with wages failing to keep pace with inflation. Analysts characterize the adjustment not as an oncoming wave of layoffs, but as a ‘low hire, low fire’ situation across corporate sectors.
Companies are not adding many people, and they are not laying many off either,
said Ken Mahoney, chief executive at Mahoney Asset Management. A lot of firms already right-sized earlier, and AI may be taking a little of the edge off new hiring, but this is not a wave of firings. The 12-month average gain going into this report was only about 45,000 jobs a month, so September fits a slow trend more than a break in the economy.
Companies are not adding many people, and they are not laying many off either. A lot of firms already right-sized earlier, and AI may be taking a little of the edge off new hiring, but this is not a wave of firings. The 12-month average gain going into this report was only about 45,000 jobs a month, so September fits a slow trend more than a break in the economy.
Ken Mahoney, Mahoney Asset Management
