Americans feel more and more glum, data shows. Economists are over it

Key Points:

• Six years after the COVID-19 pandemic, American consumer sentiment remains below pre-pandemic levels despite a recovering economy and strong job market, according to University of Michigan and Conference Board data.
• Economists note a unique post-pandemic disconnect where consumer sentiment no longer reliably predicts consumer spending, a shift that has led the Federal Reserve to focus more on objective economic indicators like inflation, spending, and hiring.
• Recent data shows robust consumer spending growth and stabilized inflation, suggesting Americans are increasing discretionary spending by choice rather than necessity, even as wage growth lags behind inflation.
• The labor market exhibits a "low hire, low fire" trend with modest payroll growth and few layoffs, reflecting a stable but cautious employment environment influenced partly by AI and earlier workforce adjustments.
• Researchers advocate for deeper analysis of consumer sentiment survey distributions and inflation expectations to better understand spending patterns and economic cycles, highlighting the potential value of these insights for future economic forecasting.