October 3, 2026, 5:04 a.m. ET
Six years after the COVID-19 pandemic, Americans are still feeling gloomy and no monthly economic report seems to make them happy.
Since the pandemic, the economy and job market have recovered, but consumer confidence has not. Sentiment has fluctuated over the past six years, but has never returned to pre-pandemic levels, according to data from the University of Michigan’s Consumer Sentiment Index. The Conference Board’s consumer confidence index also fell in September.
The gap between how people feel and the current strength of spending and the economy is a unique post-pandemic phenomenon that economists can’t really explain. Historically, consumer confidence has been a fairly reliable leading indicator of where the economy is heading, based on the idea that if the consumer feels confident and optimistic, they will spend more. Otherwise, they won’t and the economy heads into a period of slowdown. Consumer spending accounts for about 70% of the U.S. economy.
Even though Americans and the media spend a lot of time complaining about consumer malaise and its roots, economists and some policymakers are moving on.
“From our perspective at the Chicago Fed, we’ve been interested in consumer confidence for a specific reason, which is that it’s a good leading indicator of consumer spending,” Chicago Federal Reserve President Austan Goolsbee told reporters at an event on the consumer confidence disconnect. “And over the last six years, it has become a much worse leading indicator of consumer spending.”
What are the Fed and economists looking at?
When subjective measures like consumer confidence inexplicably deviate from their historical role, economists at the Chicago Fed rely more on quantifiable data., objective statistics like inflation, spending, hiring and economic growth to make forecasts, Goolsbee said.
The latest statistics show that the economy and consumers, despite the latter’s persistent gloom, remain resilient. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, showed that price increases stabilized and consumers continued to spend heavily.
Consumer spending in August jumped 0.9% compared to July, and it’s not just because they paid higher prices or had to buy basic necessities. Adjusted for inflation, spending increased by 0.6%, its largest monthly increase since March 2025.
“Americans continue to increase their discretionary spending, both on goods and services, suggesting that consumers are increasing their spending because they want to, not because they have to,” Bank of America said last month in an analysis of its own customers’ card spending.
The Labor Department’s monthly jobs report showed that payroll growth in September slowed and wages last month did not keep up with inflation, but economists said that was more reflective of a situation of “low hiring and low fire” rather than layoffs.
“Companies aren’t hiring a lot of people and they’re not laying off a lot either,” said Ken Mahoney, managing director of Mahoney Asset Management. “Many companies have already scaled earlier, and AI might reduce the advantage of new hires a bit, but this isn’t a wave of layoffs. The 12-month average gain from this report was only about 45,000 jobs per month, so September is more of a slow trend than a pause in the economy.”
Consumer gloom doesn’t matter?
Consumer confidence as a leading indicator of spending is less useful for economic analysis and Fed decisions these days, but digging deeper into the data could prove useful, researchers at the event said.
Surveys often report the median, or precise midpoint of all responses, but the real story may lie in the distributions, researchers said. Distributions encompass all responses and can show patterns at the edges that medians can hide.
A breakdown could, for example, reveal whether a small group is responsible for the vast majority of spending. This information could be useful, the researchers said.
“If we move into a world where 90% of spending is done by 10% of the population, we need to think about what that means for overall GDP (gross domestic product) growth and what that means for overall employment,” Goolsbee said.
Deeper analyzes of subsections of consumer confidence surveys, such as inflation expectations, are also of interest to Goolsbee.
“There is some measure of expectations in this data, and let’s expand some of these measures as perhaps being better indicators of where we are in the business cycle than just sentiment,” he said.
Jerome Powell, the last chairman of the Federal Reserve, often stressed the importance of keeping long-term inflation expectations “well anchored.”
Although Goolsbee said he prefers measures of inflation expectations based on financial markets, such as signals from Treasury yields, he said some economists argue that survey-based expectations are better.
“I put out a call for research” on this, Goolsbee said. “Tell me if this is a good measure.”
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance advice and business news Monday through Friday mornings.
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